Correlation Between Vanguard Total and PBND

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

By analyzing existing cross correlation between Vanguard Total Stock and PBND, you can compare the effects of market volatilities on Vanguard Total and PBND 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 PBND. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Total and PBND.

Diversification Opportunities for Vanguard Total and PBND

-0.48

Correlation Coefficient

Vanguard Total  PBND

Very good diversification

The 3 months correlation between Vanguard and PBND is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Stock and PBND in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PBND 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 Stock are associated (or correlated) with PBND. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PBND has no effect on the direction of Vanguard Total i.e., Vanguard Total and PBND go up and down completely randomly.

Pair Corralation between Vanguard Total and PBND

If you would invest  27,637  in Vanguard Total Stock on September 13, 2024 and sell it today you would earn a total of  2,371  from holding Vanguard Total Stock or generate 8.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	1.56%
Values	Daily Returns

Vanguard Total Stock  vs.  PBND

Vanguard Total Stock

Risk-Adjusted Performance

14 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Total Stock are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, Vanguard Total may actually be approaching a critical reversion point that can send shares even higher in January 2025.

PBND

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Vanguard Total and PBND

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

The idea behind Vanguard Total Stock and PBND 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..