Correlation Between Target Retirement and Vanguard Emerging
Can any of the company-specific risk be diversified away by investing in both Target Retirement and Vanguard Emerging 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 Target Retirement and Vanguard Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Target Retirement 2040 and Vanguard Emerging Markets, you can compare the effects of market volatilities on Target Retirement and Vanguard Emerging 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 Target Retirement with a short position of Vanguard Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Target Retirement and Vanguard Emerging.
Diversification Opportunities for Target Retirement and Vanguard Emerging
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Target and Vanguard is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Target Retirement 2040 and Vanguard Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Emerging Markets and Target Retirement 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 Target Retirement 2040 are associated (or correlated) with Vanguard Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Emerging Markets has no effect on the direction of Target Retirement i.e., Target Retirement and Vanguard Emerging go up and down completely randomly.
Pair Corralation between Target Retirement and Vanguard Emerging
Assuming the 90 days horizon Target Retirement 2040 is expected to generate 0.6 times more return on investment than Vanguard Emerging. However, Target Retirement 2040 is 1.65 times less risky than Vanguard Emerging. It trades about 0.1 of its potential returns per unit of risk. Vanguard Emerging Markets is currently generating about 0.04 per unit of risk. If you would invest 1,207 in Target Retirement 2040 on August 25, 2024 and sell it today you would earn a total of 166.00 from holding Target Retirement 2040 or generate 13.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Target Retirement 2040 vs. Vanguard Emerging Markets
Performance |
| Timeline |
| Target Retirement 2040 |
| Vanguard Emerging Markets |
Target Retirement and Vanguard Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Target Retirement and Vanguard Emerging
The main advantage of trading using opposite Target Retirement and Vanguard Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Target Retirement position performs unexpectedly, Vanguard Emerging 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 Emerging will offset losses from the drop in Vanguard Emerging's long position.| Target Retirement vs. Income Fund Income | Target Retirement vs. Usaa Nasdaq 100 | Target Retirement vs. Victory Diversified Stock | Target Retirement vs. Intermediate Term Bond Fund |
| Vanguard Emerging vs. Pro Blend Moderate Term | Vanguard Emerging vs. Qs Moderate Growth | Vanguard Emerging vs. Target Retirement 2040 | Vanguard Emerging vs. Jp Morgan Smartretirement |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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