Correlation Between Vanguard Total and BOND FUND

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Can any of the company-specific risk be diversified away by investing in both Vanguard Total and BOND FUND 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 BOND FUND 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 BOND FUND OF, you can compare the effects of market volatilities on Vanguard Total and BOND FUND 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 BOND FUND. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Total and BOND FUND.

Diversification Opportunities for Vanguard Total and BOND FUND

1.0
  Correlation Coefficient

No risk reduction

The 3 months correlation between Vanguard and BFAFX is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Bond and BOND FUND OF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BOND FUND 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 BOND FUND. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BOND FUND has no effect on the direction of Vanguard Total i.e., Vanguard Total and BOND FUND go up and down completely randomly.

Pair Corralation between Vanguard Total and BOND FUND

Assuming the 90 days horizon Vanguard Total Bond is expected to under-perform the BOND FUND. In addition to that, Vanguard Total is 1.08 times more volatile than BOND FUND OF. It trades about -0.07 of its total potential returns per unit of risk. BOND FUND OF is currently generating about -0.07 per unit of volatility. If you would invest  1,316  in BOND FUND OF on September 9, 2022 and sell it today you would lose (150.00)  from holding BOND FUND OF or give up 11.4% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Vanguard Total Bond  vs.  BOND FUND OF

 Performance (%) 
       Timeline  
Vanguard Total Bond 
Vanguard Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Total Bond are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Vanguard Total is not utilizing all of its potentials. The new stock price disturbance, may contribute to short-term losses for the investors.

Vanguard Price Channel

BOND FUND 
BFAFX Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in BOND FUND OF are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, BOND FUND is not utilizing all of its potentials. The new stock price disturbance, may contribute to short-term losses for the investors.

BFAFX Price Channel

Vanguard Total and BOND FUND Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Vanguard Total and BOND FUND

The main advantage of trading using opposite Vanguard Total and BOND FUND positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Total position performs unexpectedly, BOND FUND 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 BOND FUND will offset losses from the drop in BOND FUND's long position.
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The idea behind Vanguard Total Bond and BOND FUND OF 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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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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