Correlation Between Vanguard ESG and Vanguard Intermediate

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Can any of the company-specific risk be diversified away by investing in both Vanguard ESG and Vanguard Intermediate 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 ESG and Vanguard Intermediate into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard ESG US and Vanguard Intermediate Term Corporate, you can compare the effects of market volatilities on Vanguard ESG and Vanguard Intermediate 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 ESG with a short position of Vanguard Intermediate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard ESG and Vanguard Intermediate.

Diversification Opportunities for Vanguard ESG and Vanguard Intermediate

0.96
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Vanguard and Vanguard is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard ESG US and Vanguard Intermediate-Term Cor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Intermediate and Vanguard ESG 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 ESG US are associated (or correlated) with Vanguard Intermediate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Intermediate has no effect on the direction of Vanguard ESG i.e., Vanguard ESG and Vanguard Intermediate go up and down completely randomly.

Pair Corralation between Vanguard ESG and Vanguard Intermediate

Given the investment horizon of 90 days Vanguard ESG US is expected to generate 0.88 times more return on investment than Vanguard Intermediate. However, Vanguard ESG US is 1.14 times less risky than Vanguard Intermediate. It trades about -0.09 of its potential returns per unit of risk. Vanguard Intermediate Term Corporate is currently generating about -0.08 per unit of risk. If you would invest  6,273  in Vanguard ESG US on November 24, 2023 and sell it today you would lose (47.00) from holding Vanguard ESG US or give up 0.75% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Vanguard ESG US  vs.  Vanguard Intermediate-Term Cor

 Performance 
       Timeline  
Vanguard ESG US 

Risk-Adjusted Performance

7 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard ESG US are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, Vanguard ESG is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.
Vanguard Intermediate 

Risk-Adjusted Performance

8 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Intermediate Term Corporate are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable forward indicators, Vanguard Intermediate is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Vanguard ESG and Vanguard Intermediate Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Vanguard ESG and Vanguard Intermediate

The main advantage of trading using opposite Vanguard ESG and Vanguard Intermediate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard ESG position performs unexpectedly, Vanguard Intermediate 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 Intermediate will offset losses from the drop in Vanguard Intermediate's long position.
The idea behind Vanguard ESG US and Vanguard Intermediate Term Corporate 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.

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