Correlation Between Avantis Short-Term and Vanguard Short-Term

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

Diversification Opportunities for Avantis Short-Term and Vanguard Short-Term

1.0
  Correlation Coefficient

No risk reduction

The 1 month correlation between Avantis and Vanguard is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Avantis Short-Term Fixed and Vanguard Short-Term Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Short-Term Bond and Avantis Short-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 Avantis Short-Term Fixed 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 Bond has no effect on the direction of Avantis Short-Term i.e., Avantis Short-Term and Vanguard Short-Term go up and down completely randomly.

Pair Corralation between Avantis Short-Term and Vanguard Short-Term

Assuming the 90 days horizon Avantis Short-Term Fixed is expected to generate 0.97 times more return on investment than Vanguard Short-Term. However, Avantis Short-Term Fixed is 1.03 times less risky than Vanguard Short-Term. It trades about -0.22 of its potential returns per unit of risk. Vanguard Short-Term Bond is currently generating about -0.22 per unit of risk. If you would invest  946.00  in Avantis Short-Term Fixed on March 29, 2022 and sell it today you would lose (11.00)  from holding Avantis Short-Term Fixed or give up 1.16% of portfolio value over 90 days.
Time Period1 Month [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Avantis Short-Term Fixed  vs.  Vanguard Short-Term Bond

 Performance (%) 
      Timeline 
Avantis Short-Term Fixed 
Avantis Performance
0 of 100
Over the last 90 days Avantis Short-Term Fixed has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Avantis Short-Term is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Avantis Price Channel

Vanguard Short-Term Bond 
Vanguard Performance
0 of 100
Over the last 90 days Vanguard Short-Term Bond has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Vanguard Short-Term is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Vanguard Price Channel

Avantis Short-Term and Vanguard Short-Term Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Avantis Short-Term and Vanguard Short-Term

The main advantage of trading using opposite Avantis Short-Term and Vanguard Short-Term positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avantis Short-Term 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.

Avantis Short-Term Fixed

Pair trading matchups for Avantis Short-Term

The idea behind Avantis Short-Term Fixed and Vanguard Short-Term Bond 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.

Vanguard Short-Term Bond

Pair trading matchups for Vanguard Short-Term

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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.

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