Correlation Between Vanguard Mid and Schwab Intermediate

Can any of the company-specific risk be diversified away by investing in both Vanguard Mid and Schwab Intermediate 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 Mid and Schwab Intermediate into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Vanguard Mid Cap Index and Schwab Intermediate Term Treasury, you can compare the effects of market volatilities on Vanguard Mid and Schwab Intermediate 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 Mid with a short position of Schwab Intermediate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Mid and Schwab Intermediate.

Diversification Opportunities for Vanguard Mid and Schwab Intermediate

-0.52

Correlation Coefficient

Vanguard Mid  Schwab Intermediate

Excellent diversification

The 3 months correlation between Vanguard and Schwab is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Mid Cap Index and Schwab Intermediate Term Treas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schwab Intermediate and Vanguard Mid 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 Mid Cap Index are associated (or correlated) with Schwab Intermediate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schwab Intermediate has no effect on the direction of Vanguard Mid i.e., Vanguard Mid and Schwab Intermediate go up and down completely randomly.

Pair Corralation between Vanguard Mid and Schwab Intermediate

Allowing for the 90-day total investment horizon Vanguard Mid Cap Index is expected to under-perform the Schwab Intermediate. In addition to that, Vanguard Mid is 3.85 times more volatile than Schwab Intermediate Term Treasury. It trades about -0.12 of its total potential returns per unit of risk. Schwab Intermediate Term Treasury is currently generating about -0.07 per unit of volatility. If you would invest  2,437  in Schwab Intermediate Term Treasury on September 21, 2024 and sell it today you would lose (10.00) from holding Schwab Intermediate Term Treasury or give up 0.41% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Vanguard Mid Cap Index  vs.  Schwab Intermediate Term Treas

Vanguard Mid Cap

Risk-Adjusted Performance

4 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Mid Cap Index are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Vanguard Mid is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Schwab Intermediate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Schwab Intermediate Term Treasury has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical indicators, Schwab Intermediate is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Vanguard Mid and Schwab Intermediate

The main advantage of trading using opposite Vanguard Mid and Schwab Intermediate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Mid position performs unexpectedly, Schwab Intermediate 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 Schwab Intermediate will offset losses from the drop in Schwab Intermediate's long position.

The idea behind Vanguard Mid Cap Index and Schwab Intermediate Term Treasury 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.

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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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.