Correlation Between Vanguard Total and Vanguard Short-term

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

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

Diversification Opportunities for Vanguard Total and Vanguard Short-term

0.86

Correlation Coefficient

Vanguard Total  Vanguard Short-term

Very poor diversification

The 3 months correlation between Vanguard and Vanguard is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total International and Vanguard Short Term Government in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Short Term and Vanguard Total 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 Total International are associated (or correlated) with Vanguard Short-term. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Short Term has no effect on the direction of Vanguard Total i.e., Vanguard Total and Vanguard Short-term go up and down completely randomly.

Pair Corralation between Vanguard Total and Vanguard Short-term

Assuming the 90 days horizon Vanguard Total International is expected to generate 3.12 times more return on investment than Vanguard Short-term. However, Vanguard Total is 3.12 times more volatile than Vanguard Short Term Government. It trades about -0.03 of its potential returns per unit of risk. Vanguard Short Term Government is currently generating about -0.23 per unit of risk. If you would invest  1,999  in Vanguard Total International on August 16, 2024 and sell it today you would lose (3.00) from holding Vanguard Total International or give up 0.15% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.65%
Values	Daily Returns

Vanguard Total International  vs.  Vanguard Short Term Government

Vanguard Total Inter

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Total International are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental drivers, Vanguard Total is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Vanguard Short Term

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Short Term Government are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Vanguard Short-term 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 Total and Vanguard Short-term

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

The idea behind Vanguard Total International and Vanguard Short Term Government 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..