Correlation Between Vanguard Value and Vanguard Intermediate

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

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

Diversification Opportunities for Vanguard Value and Vanguard Intermediate

0.32

Correlation Coefficient

Vanguard Value  Vanguard Intermediate

Weak diversification

The 3 months correlation between Vanguard and Vanguard is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Value Index and Vanguard Intermediate Term Cor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Intermediate and Vanguard Value 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 Value Index are associated (or correlated) with Vanguard Intermediate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Intermediate has no effect on the direction of Vanguard Value i.e., Vanguard Value and Vanguard Intermediate go up and down completely randomly.

Pair Corralation between Vanguard Value and Vanguard Intermediate

Considering the 90-day investment horizon Vanguard Value is expected to generate 1.22 times less return on investment than Vanguard Intermediate. In addition to that, Vanguard Value is 2.59 times more volatile than Vanguard Intermediate Term Corporate. It trades about 0.04 of its total potential returns per unit of risk. Vanguard Intermediate Term Corporate is currently generating about 0.12 per unit of volatility. If you would invest  7,984  in Vanguard Intermediate Term Corporate on December 30, 2024 and sell it today you would earn a total of  183.00  from holding Vanguard Intermediate Term Corporate or generate 2.29% return on investment over 90 days.

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

Vanguard Value Index  vs.  Vanguard Intermediate Term Cor

Vanguard Value Index

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Value Index are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Vanguard Value is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Vanguard Intermediate

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Intermediate Term Corporate are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable forward indicators, Vanguard Intermediate is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Vanguard Value and Vanguard Intermediate

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

The idea behind Vanguard Value Index and Vanguard Intermediate 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.

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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.