Correlation Between Vanguard Total and Overlay Shares
Can any of the company-specific risk be diversified away by investing in both Vanguard Total and Overlay Shares 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 Overlay Shares 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 Overlay Shares Core, you can compare the effects of market volatilities on Vanguard Total and Overlay Shares 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 Overlay Shares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Total and Overlay Shares.
Diversification Opportunities for Vanguard Total and Overlay Shares
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vanguard and Overlay is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Bond and Overlay Shares Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Overlay Shares Core 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 Overlay Shares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Overlay Shares Core has no effect on the direction of Vanguard Total i.e., Vanguard Total and Overlay Shares go up and down completely randomly.
Pair Corralation between Vanguard Total and Overlay Shares
Considering the 90-day investment horizon Vanguard Total Bond is expected to under-perform the Overlay Shares. In addition to that, Vanguard Total is 1.01 times more volatile than Overlay Shares Core. It trades about -0.07 of its total potential returns per unit of risk. Overlay Shares Core is currently generating about -0.03 per unit of volatility. If you would invest 2,077 in Overlay Shares Core on August 26, 2024 and sell it today you would lose (5.00) from holding Overlay Shares Core or give up 0.24% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Total Bond vs. Overlay Shares Core
Performance |
| Timeline |
| Vanguard Total Bond |
| Overlay Shares Core |
Vanguard Total and Overlay Shares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Total and Overlay Shares
The main advantage of trading using opposite Vanguard Total and Overlay Shares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Total position performs unexpectedly, Overlay Shares 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 Overlay Shares will offset losses from the drop in Overlay Shares' long position.| Vanguard Total vs. Vanguard Total International | Vanguard Total vs. Vanguard Total International | Vanguard Total vs. Vanguard Total Stock | Vanguard Total vs. Vanguard Real Estate |
| Overlay Shares vs. iShares MSCI EAFE | Overlay Shares vs. iShares iBoxx Investment | Overlay Shares vs. iShares TIPS Bond | Overlay Shares vs. iShares 1 3 Year |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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