Correlation Between Sp 500 and Vanguard Target
Can any of the company-specific risk be diversified away by investing in both Sp 500 and Vanguard Target 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 Sp 500 and Vanguard Target into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sp 500 Index and Vanguard Target Retirement, you can compare the effects of market volatilities on Sp 500 and Vanguard Target 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 Sp 500 with a short position of Vanguard Target. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sp 500 and Vanguard Target.
Diversification Opportunities for Sp 500 and Vanguard Target
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between USPRX and Vanguard is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Sp 500 Index and Vanguard Target Retirement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Target Reti and Sp 500 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 Sp 500 Index are associated (or correlated) with Vanguard Target. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Target Reti has no effect on the direction of Sp 500 i.e., Sp 500 and Vanguard Target go up and down completely randomly.
Pair Corralation between Sp 500 and Vanguard Target
Assuming the 90 days horizon Sp 500 Index is expected to generate 1.9 times more return on investment than Vanguard Target. However, Sp 500 is 1.9 times more volatile than Vanguard Target Retirement. It trades about 0.16 of its potential returns per unit of risk. Vanguard Target Retirement is currently generating about -0.03 per unit of risk. If you would invest 7,297 in Sp 500 Index on August 28, 2024 and sell it today you would earn a total of 369.00 from holding Sp 500 Index or generate 5.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sp 500 Index vs. Vanguard Target Retirement
Performance |
| Timeline |
| Sp 500 Index |
| Vanguard Target Reti |
Sp 500 and Vanguard Target Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sp 500 and Vanguard Target
The main advantage of trading using opposite Sp 500 and Vanguard Target positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sp 500 position performs unexpectedly, Vanguard Target 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 Target will offset losses from the drop in Vanguard Target's long position.| Sp 500 vs. Small Cap Stock | Sp 500 vs. Extended Market Index | Sp 500 vs. Value Fund Value | Sp 500 vs. Income Stock Fund |
| Vanguard Target vs. Vanguard Target Retirement | Vanguard Target vs. Vanguard Target Retirement | Vanguard Target vs. Vanguard Target Retirement | Vanguard Target vs. Vanguard Target Retirement |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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