Correlation Between Pershing Square and Vanguard
Can any of the company-specific risk be diversified away by investing in both Pershing Square 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 Pershing Square and Vanguard into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pershing Square Holdings and Vanguard SP 500, you can compare the effects of market volatilities on Pershing Square 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 Pershing Square with a short position of Vanguard. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pershing Square and Vanguard.
Diversification Opportunities for Pershing Square and Vanguard
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Pershing and Vanguard is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Pershing Square Holdings and Vanguard SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard SP 500 and Pershing Square 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 Pershing Square Holdings 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 SP 500 has no effect on the direction of Pershing Square i.e., Pershing Square and Vanguard go up and down completely randomly.
Pair Corralation between Pershing Square and Vanguard
Assuming the 90 days horizon Pershing Square Holdings is expected to under-perform the Vanguard. In addition to that, Pershing Square is 1.62 times more volatile than Vanguard SP 500. It trades about -0.05 of its total potential returns per unit of risk. Vanguard SP 500 is currently generating about 0.16 per unit of volatility. If you would invest 9,138 in Vanguard SP 500 on August 30, 2024 and sell it today you would earn a total of 1,687 from holding Vanguard SP 500 or generate 18.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 97.67% |
| Values | Daily Returns |
Pershing Square Holdings vs. Vanguard SP 500
Performance |
| Timeline |
| Pershing Square Holdings |
| Vanguard SP 500 |
Pershing Square and Vanguard Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pershing Square and Vanguard
The main advantage of trading using opposite Pershing Square and Vanguard positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pershing Square 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.| Pershing Square vs. Apple Inc | Pershing Square vs. Microsoft | Pershing Square vs. Alphabet Inc Class C | Pershing Square vs. Meta Platforms |
| Vanguard vs. Vanguard FTSE All World | Vanguard vs. iShares Core MSCI | Vanguard vs. Vanguard FTSE All World | Vanguard vs. Vanguard FTSE Emerging |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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