Correlation Between Vanguard Total and Guggenheim Municipal

Can any of the company-specific risk be diversified away by investing in both Vanguard Total and Guggenheim 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 Total and Guggenheim Municipal 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 Guggenheim Municipal Income, you can compare the effects of market volatilities on Vanguard Total and Guggenheim 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 Total with a short position of Guggenheim Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Total and Guggenheim Municipal.

Diversification Opportunities for Vanguard Total and Guggenheim Municipal

0.43

Correlation Coefficient

Vanguard Total  Guggenheim Municipal

Very weak diversification

The 3 months correlation between Vanguard and Guggenheim is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Bond and Guggenheim Municipal Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guggenheim Municipal 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 Guggenheim Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guggenheim Municipal has no effect on the direction of Vanguard Total i.e., Vanguard Total and Guggenheim Municipal go up and down completely randomly.

Pair Corralation between Vanguard Total and Guggenheim Municipal

Considering the 90-day investment horizon Vanguard Total Bond is expected to generate 1.7 times more return on investment than Guggenheim Municipal. However, Vanguard Total is 1.7 times more volatile than Guggenheim Municipal Income. It trades about -0.06 of its potential returns per unit of risk. Guggenheim Municipal Income is currently generating about -0.12 per unit of risk. If you would invest  7,163  in Vanguard Total Bond on January 25, 2024 and sell it today you would lose (68.00) from holding Vanguard Total Bond or give up 0.95% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	97.62%
Values	Daily Returns

Vanguard Total Bond  vs.  Guggenheim Municipal Income

Vanguard Total Bond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Total Bond has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Vanguard Total is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Guggenheim Municipal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Guggenheim Municipal Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Guggenheim Municipal 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 Guggenheim Municipal

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

The idea behind Vanguard Total Bond and Guggenheim Municipal Income 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.