Correlation Between Vanguard Short-term and Eaton Vance

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

By analyzing existing cross correlation between Vanguard Short Term Tax Exempt and Eaton Vance Amt Free, you can compare the effects of market volatilities on Vanguard Short-term and Eaton Vance 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 Short-term with a short position of Eaton Vance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Short-term and Eaton Vance.

Diversification Opportunities for Vanguard Short-term and Eaton Vance

0.82

Correlation Coefficient

Vanguard Short-term  Eaton Vance

Very poor diversification

The 3 months correlation between Vanguard and Eaton is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Short Term Tax Exempt and Eaton Vance Amt Free in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eaton Vance Amt and Vanguard 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 Vanguard Short Term Tax Exempt are associated (or correlated) with Eaton Vance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eaton Vance Amt has no effect on the direction of Vanguard Short-term i.e., Vanguard Short-term and Eaton Vance go up and down completely randomly.

Pair Corralation between Vanguard Short-term and Eaton Vance

Assuming the 90 days horizon Vanguard Short Term Tax Exempt is expected to generate 1.05 times more return on investment than Eaton Vance. However, Vanguard Short-term is 1.05 times more volatile than Eaton Vance Amt Free. It trades about 0.22 of its potential returns per unit of risk. Eaton Vance Amt Free is currently generating about 0.21 per unit of risk. If you would invest  1,513  in Vanguard Short Term Tax Exempt on February 15, 2024 and sell it today you would earn a total of  59.00  from holding Vanguard Short Term Tax Exempt or generate 3.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Vanguard Short Term Tax Exempt  vs.  Eaton Vance Amt Free

Vanguard Short Term

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Short Term Tax Exempt 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 Short-term is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Eaton Vance Amt

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Eaton Vance Amt Free are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Eaton Vance 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 Short-term and Eaton Vance

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

The idea behind Vanguard Short Term Tax Exempt and Eaton Vance Amt Free 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..