Correlation Between Vanguard Long-term and Applied Finance

Can any of the company-specific risk be diversified away by investing in both Vanguard Long-term and Applied Finance 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 Long-term and Applied Finance into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Vanguard Long Term Treasury and Applied Finance Core, you can compare the effects of market volatilities on Vanguard Long-term and Applied Finance 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 Long-term with a short position of Applied Finance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Long-term and Applied Finance.

Diversification Opportunities for Vanguard Long-term and Applied Finance

-0.49

Correlation Coefficient

Vanguard Long-term  Applied Finance

Very good diversification

The 3 months correlation between Vanguard and Applied is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Long Term Treasury and Applied Finance Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Finance Core and Vanguard Long-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 Vanguard Long Term Treasury are associated (or correlated) with Applied Finance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Finance Core has no effect on the direction of Vanguard Long-term i.e., Vanguard Long-term and Applied Finance go up and down completely randomly.

Pair Corralation between Vanguard Long-term and Applied Finance

Assuming the 90 days horizon Vanguard Long Term Treasury is expected to generate 0.82 times more return on investment than Applied Finance. However, Vanguard Long Term Treasury is 1.22 times less risky than Applied Finance. It trades about 0.14 of its potential returns per unit of risk. Applied Finance Core is currently generating about 0.0 per unit of risk. If you would invest  779.00  in Vanguard Long Term Treasury on August 26, 2025 and sell it today you would earn a total of  37.00  from holding Vanguard Long Term Treasury or generate 4.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Vanguard Long Term Treasury  vs.  Applied Finance Core

Vanguard Long Term

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Long Term Treasury are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Vanguard Long-term is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Applied Finance Core

Risk-Adjusted Performance

Weakest

Over the last 90 days Applied Finance Core has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong essential indicators, Applied Finance 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 Long-term and Applied Finance

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

The idea behind Vanguard Long Term Treasury and Applied Finance Core 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.