Correlation Between Vanguard ESG and Vanguard Total
Can any of the company-specific risk be diversified away by investing in both Vanguard ESG and Vanguard Total 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 ESG and Vanguard Total into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard ESG Stock and Vanguard Total Stock, you can compare the effects of market volatilities on Vanguard ESG and Vanguard Total 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 ESG with a short position of Vanguard Total. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard ESG and Vanguard Total.
Diversification Opportunities for Vanguard ESG and Vanguard Total
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Vanguard and Vanguard is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard ESG Stock and Vanguard Total Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Total Stock and Vanguard ESG 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 ESG Stock are associated (or correlated) with Vanguard Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Total Stock has no effect on the direction of Vanguard ESG i.e., Vanguard ESG and Vanguard Total go up and down completely randomly.
Pair Corralation between Vanguard ESG and Vanguard Total
Given the investment horizon of 90 days Vanguard ESG Stock is expected to generate 1.13 times more return on investment than Vanguard Total. However, Vanguard ESG is 1.13 times more volatile than Vanguard Total Stock. It trades about 0.1 of its potential returns per unit of risk. Vanguard Total Stock is currently generating about 0.06 per unit of risk. If you would invest 10,676 in Vanguard ESG Stock on September 12, 2024 and sell it today you would earn a total of 131.00 from holding Vanguard ESG Stock or generate 1.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard ESG Stock vs. Vanguard Total Stock
Performance |
| Timeline |
| Vanguard ESG Stock |
| Vanguard Total Stock |
Vanguard ESG and Vanguard Total Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard ESG and Vanguard Total
The main advantage of trading using opposite Vanguard ESG and Vanguard Total positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard ESG position performs unexpectedly, Vanguard Total 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 Total will offset losses from the drop in Vanguard Total's long position.| Vanguard ESG vs. Vanguard SP 500 | Vanguard ESG vs. Vanguard Real Estate | Vanguard ESG vs. Vanguard Total Bond | Vanguard ESG vs. Vanguard High Dividend |
| Vanguard Total vs. Vanguard SP 500 | Vanguard Total vs. Vanguard Real Estate | Vanguard Total vs. Vanguard Total Bond | Vanguard Total vs. Vanguard High Dividend |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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