Correlation Between Vanguard Large-cap and Vanguard Intermediate

Can any of the company-specific risk be diversified away by investing in both Vanguard Large-cap 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 Large-cap 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 Large Cap Index and Vanguard Intermediate Term Tax Exempt, you can compare the effects of market volatilities on Vanguard Large-cap 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 Large-cap with a short position of Vanguard Intermediate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Large-cap and Vanguard Intermediate.

Diversification Opportunities for Vanguard Large-cap and Vanguard Intermediate

0.77

Correlation Coefficient

Vanguard Large-cap  Vanguard Intermediate

Poor diversification

The 3 months correlation between Vanguard and Vanguard is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Large Cap Index and Vanguard Intermediate Term Tax in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Intermediate and Vanguard Large-cap 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 Large Cap 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 Large-cap i.e., Vanguard Large-cap and Vanguard Intermediate go up and down completely randomly.

Pair Corralation between Vanguard Large-cap and Vanguard Intermediate

Assuming the 90 days horizon Vanguard Large Cap Index is expected to generate 6.0 times more return on investment than Vanguard Intermediate. However, Vanguard Large-cap is 6.0 times more volatile than Vanguard Intermediate Term Tax Exempt. It trades about 0.23 of its potential returns per unit of risk. Vanguard Intermediate Term Tax Exempt is currently generating about 0.11 per unit of risk. If you would invest  13,068  in Vanguard Large Cap Index on May 5, 2025 and sell it today you would earn a total of  1,436  from holding Vanguard Large Cap Index or generate 10.99% return on investment over 90 days.

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

Vanguard Large Cap Index  vs.  Vanguard Intermediate Term Tax

Vanguard Large Cap

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Large Cap Index are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Vanguard Large-cap may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Vanguard Intermediate

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Intermediate Term Tax Exempt are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Vanguard Intermediate 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 Large-cap and Vanguard Intermediate

The main advantage of trading using opposite Vanguard Large-cap and Vanguard Intermediate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Large-cap 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 Large Cap Index and Vanguard Intermediate Term Tax Exempt 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 Transaction History module to view history of all your transactions and understand their impact on performance.