Correlation Between Vanguard Limited-term and Ab Municipal
Can any of the company-specific risk be diversified away by investing in both Vanguard Limited-term and Ab Municipal 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 Limited-term and Ab Municipal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Limited Term Tax Exempt and Ab Municipal Bond, you can compare the effects of market volatilities on Vanguard Limited-term and Ab Municipal 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 Limited-term with a short position of Ab Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Limited-term and Ab Municipal.
Diversification Opportunities for Vanguard Limited-term and Ab Municipal
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vanguard and AUNCX is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Limited Term Tax Exem and Ab Municipal Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ab Municipal Bond and Vanguard Limited-term 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 Limited Term Tax Exempt are associated (or correlated) with Ab Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ab Municipal Bond has no effect on the direction of Vanguard Limited-term i.e., Vanguard Limited-term and Ab Municipal go up and down completely randomly.
Pair Corralation between Vanguard Limited-term and Ab Municipal
Assuming the 90 days horizon Vanguard Limited Term Tax Exempt is expected to generate 0.62 times more return on investment than Ab Municipal. However, Vanguard Limited Term Tax Exempt is 1.61 times less risky than Ab Municipal. It trades about -0.1 of its potential returns per unit of risk. Ab Municipal Bond is currently generating about -0.18 per unit of risk. If you would invest 1,099 in Vanguard Limited Term Tax Exempt on September 3, 2025 and sell it today you would lose (1.00) from holding Vanguard Limited Term Tax Exempt or give up 0.09% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Limited Term Tax Exem vs. Ab Municipal Bond
Performance |
| Timeline |
| Vanguard Limited Term |
| Ab Municipal Bond |
Vanguard Limited-term and Ab Municipal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Limited-term and Ab Municipal
The main advantage of trading using opposite Vanguard Limited-term and Ab Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Limited-term position performs unexpectedly, Ab Municipal 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 Ab Municipal will offset losses from the drop in Ab Municipal's long position.| Vanguard Limited-term vs. Principal Lifetime Hybrid | Vanguard Limited-term vs. Enhanced Large Pany | Vanguard Limited-term vs. Alternative Asset Allocation | Vanguard Limited-term vs. Pnc Balanced Allocation |
| Ab Municipal vs. Siit Large Cap | Ab Municipal vs. Qs Large Cap | Ab Municipal vs. American Century Etf | Ab Municipal vs. Qs Large Cap |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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