Correlation Between Vanguard Materials and Vanguard High-yield
Can any of the company-specific risk be diversified away by investing in both Vanguard Materials and Vanguard High-yield 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 Materials and Vanguard High-yield into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Materials Index and Vanguard High Yield Tax Exempt, you can compare the effects of market volatilities on Vanguard Materials and Vanguard High-yield 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 Materials with a short position of Vanguard High-yield. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Materials and Vanguard High-yield.
Diversification Opportunities for Vanguard Materials and Vanguard High-yield
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Vanguard and VANGUARD is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Materials Index and Vanguard High Yield Tax Exempt in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard High Yield and Vanguard Materials 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 Materials Index are associated (or correlated) with Vanguard High-yield. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard High Yield has no effect on the direction of Vanguard Materials i.e., Vanguard Materials and Vanguard High-yield go up and down completely randomly.
Pair Corralation between Vanguard Materials and Vanguard High-yield
Assuming the 90 days horizon Vanguard Materials Index is expected to under-perform the Vanguard High-yield. In addition to that, Vanguard Materials is 5.23 times more volatile than Vanguard High Yield Tax Exempt. It trades about -0.04 of its total potential returns per unit of risk. Vanguard High Yield Tax Exempt is currently generating about 0.38 per unit of volatility. If you would invest 1,020 in Vanguard High Yield Tax Exempt on August 29, 2025 and sell it today you would earn a total of 48.00 from holding Vanguard High Yield Tax Exempt or generate 4.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Materials Index vs. Vanguard High Yield Tax Exempt
Performance |
| Timeline |
| Vanguard Materials Index |
| Vanguard High Yield |
Vanguard Materials and Vanguard High-yield Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Materials and Vanguard High-yield
The main advantage of trading using opposite Vanguard Materials and Vanguard High-yield positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Materials position performs unexpectedly, Vanguard High-yield 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 High-yield will offset losses from the drop in Vanguard High-yield's long position.| Vanguard Materials vs. Franklin Small Cap | Vanguard Materials vs. Victory Integrity Smallmid Cap | Vanguard Materials vs. Gmo Small Cap | Vanguard Materials vs. Glg Intl Small |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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