Correlation Between Litman Gregory and Vanguard Explorer
Can any of the company-specific risk be diversified away by investing in both Litman Gregory and Vanguard Explorer 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 Litman Gregory and Vanguard Explorer into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Litman Gregory Masters and Vanguard Explorer Fund, you can compare the effects of market volatilities on Litman Gregory and Vanguard Explorer 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 Litman Gregory with a short position of Vanguard Explorer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Litman Gregory and Vanguard Explorer.
Diversification Opportunities for Litman Gregory and Vanguard Explorer
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Litman and Vanguard is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Litman Gregory Masters and Vanguard Explorer Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Explorer and Litman Gregory 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 Litman Gregory Masters are associated (or correlated) with Vanguard Explorer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Explorer has no effect on the direction of Litman Gregory i.e., Litman Gregory and Vanguard Explorer go up and down completely randomly.
Pair Corralation between Litman Gregory and Vanguard Explorer
Assuming the 90 days horizon Litman Gregory is expected to generate 4.19 times less return on investment than Vanguard Explorer. But when comparing it to its historical volatility, Litman Gregory Masters is 1.23 times less risky than Vanguard Explorer. It trades about 0.02 of its potential returns per unit of risk. Vanguard Explorer Fund is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 10,655 in Vanguard Explorer Fund on September 12, 2024 and sell it today you would earn a total of 2,251 from holding Vanguard Explorer Fund or generate 21.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Litman Gregory Masters vs. Vanguard Explorer Fund
Performance |
| Timeline |
| Litman Gregory Masters |
| Vanguard Explorer |
Litman Gregory and Vanguard Explorer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Litman Gregory and Vanguard Explorer
The main advantage of trading using opposite Litman Gregory and Vanguard Explorer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Litman Gregory position performs unexpectedly, Vanguard Explorer 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 Explorer will offset losses from the drop in Vanguard Explorer's long position.| Litman Gregory vs. Science Technology Fund | Litman Gregory vs. Invesco Technology Fund | Litman Gregory vs. Fidelity Advisor Technology | Litman Gregory vs. Global Technology Portfolio |
| Vanguard Explorer vs. Third Avenue Real | Vanguard Explorer vs. Aegis Value Fund | Vanguard Explorer vs. Litman Gregory Masters | Vanguard Explorer vs. Marsico Growth Fund |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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