Correlation Between Vanguard Long-term and Vanguard New

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

By analyzing existing cross correlation between Vanguard Long Term Tax Exempt and Vanguard New Jersey, you can compare the effects of market volatilities on Vanguard Long-term and Vanguard New 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 Long-term with a short position of Vanguard New. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Long-term and Vanguard New.

Diversification Opportunities for Vanguard Long-term and Vanguard New

0.88

Correlation Coefficient

Vanguard Long-term  Vanguard New

Very poor diversification

The 3 months correlation between Vanguard and Vanguard is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Long Term Tax Exempt and Vanguard New Jersey in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard New Jersey and Vanguard Long-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 Long Term Tax Exempt are associated (or correlated) with Vanguard New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard New Jersey has no effect on the direction of Vanguard Long-term i.e., Vanguard Long-term and Vanguard New go up and down completely randomly.

Pair Corralation between Vanguard Long-term and Vanguard New

Assuming the 90 days horizon Vanguard Long Term Tax Exempt is expected to generate 0.99 times more return on investment than Vanguard New. However, Vanguard Long Term Tax Exempt is 1.01 times less risky than Vanguard New. It trades about 0.07 of its potential returns per unit of risk. Vanguard New Jersey is currently generating about 0.07 per unit of risk. If you would invest  1,092  in Vanguard Long Term Tax Exempt on September 4, 2024 and sell it today you would earn a total of  14.00  from holding Vanguard Long Term Tax Exempt or generate 1.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

Vanguard Long Term Tax Exempt  vs.  Vanguard New Jersey

Vanguard Long Term

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Long Term Tax Exempt are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Vanguard Long-term is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Vanguard New Jersey

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard New Jersey are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Vanguard New 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 Long-term and Vanguard New

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

The idea behind Vanguard Long Term Tax Exempt and Vanguard New Jersey 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.