Correlation Between Vanguard Intermediate and Vanguard Global

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

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

Diversification Opportunities for Vanguard Intermediate and Vanguard Global

-0.62

Correlation Coefficient

Vanguard Intermediate  Vanguard Global

Excellent diversification

The 3 months correlation between Vanguard and Vanguard is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Intermediate Term Gov and Vanguard Global Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Global Equity and Vanguard Intermediate 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 Intermediate Term Government are associated (or correlated) with Vanguard Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Global Equity has no effect on the direction of Vanguard Intermediate i.e., Vanguard Intermediate and Vanguard Global go up and down completely randomly.

Pair Corralation between Vanguard Intermediate and Vanguard Global

Assuming the 90 days horizon Vanguard Intermediate Term Government is expected to under-perform the Vanguard Global. But the mutual fund apears to be less risky and, when comparing its historical volatility, Vanguard Intermediate Term Government is 3.0 times less risky than Vanguard Global. The mutual fund trades about -0.08 of its potential returns per unit of risk. The Vanguard Global Equity is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  3,620  in Vanguard Global Equity on September 2, 2024 and sell it today you would earn a total of  249.00  from holding Vanguard Global Equity or generate 6.88% return on investment over 90 days.

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

Vanguard Intermediate Term Gov  vs.  Vanguard Global Equity

Vanguard Intermediate

Risk-Adjusted Performance

0 of 100

Very Weak

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

Vanguard Global Equity

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Global Equity are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Vanguard Global may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Vanguard Intermediate and Vanguard Global

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

The idea behind Vanguard Intermediate Term Government and Vanguard Global Equity 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.