Correlation Between Vanguard Wellesley and Pro-blend(r) Moderate

Can any of the company-specific risk be diversified away by investing in both Vanguard Wellesley and Pro-blend(r) Moderate 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 Wellesley and Pro-blend(r) Moderate into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Vanguard Wellesley Income and Pro Blend Moderate Term, you can compare the effects of market volatilities on Vanguard Wellesley and Pro-blend(r) Moderate 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 Wellesley with a short position of Pro-blend(r) Moderate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Wellesley and Pro-blend(r) Moderate.

Diversification Opportunities for Vanguard Wellesley and Pro-blend(r) Moderate

0.79

Correlation Coefficient

Vanguard Wellesley  Pro-blend(r) Moderate

Poor diversification

The 3 months correlation between Vanguard and Pro-blend(r) is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Wellesley Income and Pro Blend Moderate Term in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pro-blend(r) Moderate and Vanguard Wellesley 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 Wellesley Income are associated (or correlated) with Pro-blend(r) Moderate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pro-blend(r) Moderate has no effect on the direction of Vanguard Wellesley i.e., Vanguard Wellesley and Pro-blend(r) Moderate go up and down completely randomly.

Pair Corralation between Vanguard Wellesley and Pro-blend(r) Moderate

Assuming the 90 days horizon Vanguard Wellesley Income is expected to generate 0.86 times more return on investment than Pro-blend(r) Moderate. However, Vanguard Wellesley Income is 1.17 times less risky than Pro-blend(r) Moderate. It trades about 0.15 of its potential returns per unit of risk. Pro Blend Moderate Term is currently generating about 0.04 per unit of risk. If you would invest  2,474  in Vanguard Wellesley Income on December 21, 2024 and sell it today you would earn a total of  80.00  from holding Vanguard Wellesley Income or generate 3.23% return on investment over 90 days.

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

Vanguard Wellesley Income  vs.  Pro Blend Moderate Term

Vanguard Wellesley Income

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Wellesley Income are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Vanguard Wellesley is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pro-blend(r) Moderate

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Pro Blend Moderate Term are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Pro-blend(r) Moderate 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 Wellesley and Pro-blend(r) Moderate

The main advantage of trading using opposite Vanguard Wellesley and Pro-blend(r) Moderate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Wellesley position performs unexpectedly, Pro-blend(r) Moderate 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 Pro-blend(r) Moderate will offset losses from the drop in Pro-blend(r) Moderate's long position.

The idea behind Vanguard Wellesley Income and Pro Blend Moderate Term 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.