Correlation Between Vanguard Global and Us Treasury

Can any of the company-specific risk be diversified away by investing in both Vanguard Global and Us Treasury at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Vanguard Global and Us Treasury into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Vanguard Global Credit and Us Treasury Long Term, you can compare the effects of market volatilities on Vanguard Global and Us Treasury and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Vanguard Global with a short position of Us Treasury. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Global and Us Treasury.

Diversification Opportunities for Vanguard Global and Us Treasury

0.83

Correlation Coefficient

Vanguard Global  Us Treasury

Very poor diversification

The 3 months correlation between Vanguard and PRULX is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Global Credit and Us Treasury Long Term in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Us Treasury Long and Vanguard Global is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Vanguard Global Credit are associated (or correlated) with Us Treasury. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Us Treasury Long has no effect on the direction of Vanguard Global i.e., Vanguard Global and Us Treasury go up and down completely randomly.

Pair Corralation between Vanguard Global and Us Treasury

Assuming the 90 days horizon Vanguard Global Credit is expected to generate 0.75 times more return on investment than Us Treasury. However, Vanguard Global Credit is 1.33 times less risky than Us Treasury. It trades about -0.39 of its potential returns per unit of risk. Us Treasury Long Term is currently generating about -0.6 per unit of risk. If you would invest  976.00  in Vanguard Global Credit on October 7, 2024 and sell it today you would lose (32.00) from holding Vanguard Global Credit or give up 3.28% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Vanguard Global Credit  vs.  Us Treasury Long Term

Vanguard Global Credit

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Global Credit has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Vanguard Global is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Us Treasury Long

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Us Treasury Long Term has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Vanguard Global and Us Treasury

The main advantage of trading using opposite Vanguard Global and Us Treasury positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Global position performs unexpectedly, Us Treasury can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Us Treasury will offset losses from the drop in Us Treasury's long position.

The idea behind Vanguard Global Credit and Us Treasury Long Term pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.