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 Bond and Vanguard Short Term Investment Grade, 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
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vanguard and Vanguard is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Bond and Vanguard Short Term Investment 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 Bond 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 is expected to generate 1.79 times less return on investment than Vanguard Short-term. But when comparing it to its historical volatility, Vanguard Total Bond is 1.81 times less risky than Vanguard Short-term. It trades about 0.06 of its potential returns per unit of risk. Vanguard Short Term Investment Grade is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 1,023 in Vanguard Short Term Investment Grade on April 22, 2025 and sell it today you would earn a total of 21.00 from holding Vanguard Short Term Investment Grade or generate 2.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Total Bond vs. Vanguard Short Term Investment
Performance |
| Timeline |
| Vanguard Total Bond |
| Vanguard Short Term |
Vanguard Total and Vanguard Short-term Volatility Contrast
Predicted Return Density |
| Returns |
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.| Vanguard Total vs. Vanguard Total International | Vanguard Total vs. Vanguard Total Stock | Vanguard Total vs. Vanguard Total International | Vanguard Total vs. Vanguard 500 Index |
Check out your portfolio center.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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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