Correlation Between Vanguard Total and Vanguard Short

Can any of the company-specific risk be diversified away by investing in both Vanguard Total and Vanguard Short 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 Short 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 Vanguard Short Term Treasury, you can compare the effects of market volatilities on Vanguard Total and Vanguard Short 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 Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Total and Vanguard Short.

Diversification Opportunities for Vanguard Total and Vanguard Short

-0.42

Correlation Coefficient

Vanguard Total  Vanguard Short

Very good diversification

The 3 months correlation between Vanguard and Vanguard is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Stock and Vanguard Short Term Treasury in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Short 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 Stock are associated (or correlated) with Vanguard Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Short Term has no effect on the direction of Vanguard Total i.e., Vanguard Total and Vanguard Short go up and down completely randomly.

Pair Corralation between Vanguard Total and Vanguard Short

Considering the 90-day investment horizon Vanguard Total Stock is expected to generate 6.59 times more return on investment than Vanguard Short. However, Vanguard Total is 6.59 times more volatile than Vanguard Short Term Treasury. It trades about 0.22 of its potential returns per unit of risk. Vanguard Short Term Treasury is currently generating about 0.01 per unit of risk. If you would invest  27,155  in Vanguard Total Stock on September 3, 2024 and sell it today you would earn a total of  2,831  from holding Vanguard Total Stock or generate 10.43% return on investment over 90 days.

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

Vanguard Total Stock  vs.  Vanguard Short Term Treasury

Vanguard Total Stock

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Total Stock are ranked lower than 16 (%) 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.

Vanguard Short Term

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days Vanguard Short Term Treasury has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Vanguard Short is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Vanguard Total and Vanguard Short

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

The idea behind Vanguard Total Stock and Vanguard Short 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.