Correlation Between Vanguard Ultra-short-term and Vanguard Core

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

By analyzing existing cross correlation between Vanguard Ultra Short Term Bond and Vanguard E Bond, you can compare the effects of market volatilities on Vanguard Ultra-short-term and Vanguard Core 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 Ultra-short-term with a short position of Vanguard Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Ultra-short-term and Vanguard Core.

Diversification Opportunities for Vanguard Ultra-short-term and Vanguard Core

0.94

Correlation Coefficient

Vanguard Ultra-short-term  Vanguard Core

Almost no diversification

The 3 months correlation between VANGUARD and Vanguard is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Ultra Short Term Bond and Vanguard E Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard E Bond and Vanguard Ultra-short-term 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 Ultra Short Term Bond are associated (or correlated) with Vanguard Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard E Bond has no effect on the direction of Vanguard Ultra-short-term i.e., Vanguard Ultra-short-term and Vanguard Core go up and down completely randomly.

Pair Corralation between Vanguard Ultra-short-term and Vanguard Core

Assuming the 90 days horizon Vanguard Ultra-short-term is expected to generate 1.92 times less return on investment than Vanguard Core. But when comparing it to its historical volatility, Vanguard Ultra Short Term Bond is 6.24 times less risky than Vanguard Core. It trades about 0.43 of its potential returns per unit of risk. Vanguard E Bond is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  880.00  in Vanguard E Bond on December 30, 2024 and sell it today you would earn a total of  22.00  from holding Vanguard E Bond or generate 2.5% return on investment over 90 days.

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

Vanguard Ultra Short Term Bond  vs.  Vanguard E Bond

Vanguard Ultra-short-term

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Ultra Short Term Bond are ranked lower than 34 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Vanguard Ultra-short-term is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Vanguard E Bond

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard E Bond are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Vanguard Core is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vanguard Ultra-short-term and Vanguard Core

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

The idea behind Vanguard Ultra Short Term Bond and Vanguard E Bond 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.