Correlation Between Vanguard Developed and Vanguard Short-term
Can any of the company-specific risk be diversified away by investing in both Vanguard Developed 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 Developed 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 Developed Markets and Vanguard Short Term Federal, you can compare the effects of market volatilities on Vanguard Developed 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 Developed with a short position of Vanguard Short-term. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Developed and Vanguard Short-term.
Diversification Opportunities for Vanguard Developed and Vanguard Short-term
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Vanguard and Vanguard is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Developed Markets and Vanguard Short Term Federal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Short Term and Vanguard Developed 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 Developed Markets 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 Developed i.e., Vanguard Developed and Vanguard Short-term go up and down completely randomly.
Pair Corralation between Vanguard Developed and Vanguard Short-term
Assuming the 90 days horizon Vanguard Developed Markets is expected to generate 6.76 times more return on investment than Vanguard Short-term. However, Vanguard Developed is 6.76 times more volatile than Vanguard Short Term Federal. It trades about 0.11 of its potential returns per unit of risk. Vanguard Short Term Federal is currently generating about 0.13 per unit of risk. If you would invest 1,896 in Vanguard Developed Markets on September 9, 2025 and sell it today you would earn a total of 96.00 from holding Vanguard Developed Markets or generate 5.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Developed Markets vs. Vanguard Short Term Federal
Performance |
| Timeline |
| Vanguard Developed |
| Vanguard Short Term |
Vanguard Developed and Vanguard Short-term Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Developed and Vanguard Short-term
The main advantage of trading using opposite Vanguard Developed and Vanguard Short-term positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Developed 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 Developed vs. Vanguard FTSE Developed | Vanguard Developed vs. Vanguard Developed Markets | Vanguard Developed vs. Vanguard Value Index | Vanguard Developed vs. Vanguard Mid Cap Index |
| Vanguard Short-term vs. Fidelity Investment Grade | Vanguard Short-term vs. Vanguard Extended Duration | Vanguard Short-term vs. Direxion Daily Technology | Vanguard Short-term vs. Direxion Daily 20 |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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