Correlation Between Vanguard Total and Vanguard Long

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

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

Diversification Opportunities for Vanguard Total and Vanguard Long

1.0

Correlation Coefficient

Vanguard Total  Vanguard Long

No risk reduction

The 3 months correlation between Vanguard and Vanguard is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Corporate and Vanguard Long Term Corporate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Long Term and Vanguard Total 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 Total Corporate are associated (or correlated) with Vanguard Long. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Long Term has no effect on the direction of Vanguard Total i.e., Vanguard Total and Vanguard Long go up and down completely randomly.

Pair Corralation between Vanguard Total and Vanguard Long

Considering the 90-day investment horizon Vanguard Total Corporate is expected to generate 0.53 times more return on investment than Vanguard Long. However, Vanguard Total Corporate is 1.9 times less risky than Vanguard Long. It trades about -0.11 of its potential returns per unit of risk. Vanguard Long Term Corporate is currently generating about -0.12 per unit of risk. If you would invest  7,884  in Vanguard Total Corporate on September 16, 2024 and sell it today you would lose (204.00) from holding Vanguard Total Corporate or give up 2.59% of portfolio value over 90 days.

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

Vanguard Total Corporate  vs.  Vanguard Long Term Corporate

Vanguard Total Corporate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Total Corporate has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Vanguard Total is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Vanguard Long Term

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Long Term Corporate has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, Vanguard Long is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Vanguard Total and Vanguard Long

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

The idea behind Vanguard Total Corporate and Vanguard Long Term Corporate 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .