Correlation Between Vanguard Health and Government Securities

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

By analyzing existing cross correlation between Vanguard Health Care and Government Securities Fund, you can compare the effects of market volatilities on Vanguard Health and Government Securities 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 Health with a short position of Government Securities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Health and Government Securities.

Diversification Opportunities for Vanguard Health and Government Securities

0.81

Correlation Coefficient

Vanguard Health  Government Securities

Very poor diversification

The 3 months correlation between Vanguard and Government is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Health Care and Government Securities Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Government Securities and Vanguard Health 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 Health Care are associated (or correlated) with Government Securities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Government Securities has no effect on the direction of Vanguard Health i.e., Vanguard Health and Government Securities go up and down completely randomly.

Pair Corralation between Vanguard Health and Government Securities

Assuming the 90 days horizon Vanguard Health Care is expected to generate 4.21 times more return on investment than Government Securities. However, Vanguard Health is 4.21 times more volatile than Government Securities Fund. It trades about 0.2 of its potential returns per unit of risk. Government Securities Fund is currently generating about 0.21 per unit of risk. If you would invest  17,262  in Vanguard Health Care on July 29, 2025 and sell it today you would earn a total of  2,122  from holding Vanguard Health Care or generate 12.29% return on investment over 90 days.

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

Vanguard Health Care  vs.  Government Securities Fund

Vanguard Health Care

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Health Care are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Vanguard Health may actually be approaching a critical reversion point that can send shares even higher in November 2025.

Government Securities

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Government Securities Fund are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Government Securities 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 Health and Government Securities

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

The idea behind Vanguard Health Care and Government Securities Fund 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.