Correlation Between Growth Fund and Vanguard
Can any of the company-specific risk be diversified away by investing in both Growth Fund and Vanguard 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 Growth Fund and Vanguard into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Growth Fund Of and Vanguard Growth Fund, you can compare the effects of market volatilities on Growth Fund and Vanguard 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 Growth Fund with a short position of Vanguard. Check out your portfolio center. Please also check ongoing floating volatility patterns of Growth Fund and Vanguard.
Diversification Opportunities for Growth Fund and Vanguard
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Growth and Vanguard is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Growth Fund Of and Vanguard Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Growth and Growth Fund 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 Growth Fund Of are associated (or correlated) with Vanguard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Growth has no effect on the direction of Growth Fund i.e., Growth Fund and Vanguard go up and down completely randomly.
Pair Corralation between Growth Fund and Vanguard
Assuming the 90 days horizon Growth Fund is expected to generate 1.36 times less return on investment than Vanguard. But when comparing it to its historical volatility, Growth Fund Of is 1.11 times less risky than Vanguard. It trades about 0.09 of its potential returns per unit of risk. Vanguard Growth Fund is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 5,382 in Vanguard Growth Fund on August 24, 2024 and sell it today you would earn a total of 2,011 from holding Vanguard Growth Fund or generate 37.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.6% |
| Values | Daily Returns |
Growth Fund Of vs. Vanguard Growth Fund
Performance |
| Timeline |
| Growth Fund |
| Vanguard Growth |
Growth Fund and Vanguard Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Growth Fund and Vanguard
The main advantage of trading using opposite Growth Fund and Vanguard positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Growth Fund position performs unexpectedly, Vanguard 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 will offset losses from the drop in Vanguard's long position.| Growth Fund vs. Short Duration Inflation | Growth Fund vs. Arrow Managed Futures | Growth Fund vs. Ab Bond Inflation | Growth Fund vs. Ab Bond Inflation |
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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 the Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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