Correlation Between Vanguard ESG and Vanguard Funds

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Can any of the company-specific risk be diversified away by investing in both Vanguard ESG and Vanguard Funds 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 Vanguard ESG and Vanguard Funds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard ESG Developed and Vanguard Funds Public, you can compare the effects of market volatilities on Vanguard ESG and Vanguard Funds 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 Vanguard ESG with a short position of Vanguard Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard ESG and Vanguard Funds.

Diversification Opportunities for Vanguard ESG and Vanguard Funds

-0.05
  Correlation Coefficient

Good diversification

The 3 months correlation between Vanguard and Vanguard is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard ESG Developed and Vanguard Funds Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Funds Public and Vanguard ESG 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 Vanguard ESG Developed are associated (or correlated) with Vanguard Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Funds Public has no effect on the direction of Vanguard ESG i.e., Vanguard ESG and Vanguard Funds go up and down completely randomly.

Pair Corralation between Vanguard ESG and Vanguard Funds

Assuming the 90 days trading horizon Vanguard ESG Developed is expected to generate 1.59 times more return on investment than Vanguard Funds. However, Vanguard ESG is 1.59 times more volatile than Vanguard Funds Public. It trades about 0.25 of its potential returns per unit of risk. Vanguard Funds Public is currently generating about 0.02 per unit of risk. If you would invest  619.00  in Vanguard ESG Developed on August 31, 2024 and sell it today you would earn a total of  22.00  from holding Vanguard ESG Developed or generate 3.55% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Vanguard ESG Developed  vs.  Vanguard Funds Public

 Performance 
       Timeline  
Vanguard ESG Developed 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard ESG Developed are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Vanguard ESG is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.
Vanguard Funds Public 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Vanguard Funds Public has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Vanguard Funds is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Vanguard ESG and Vanguard Funds Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Vanguard ESG and Vanguard Funds

The main advantage of trading using opposite Vanguard ESG and Vanguard Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard ESG position performs unexpectedly, Vanguard Funds 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 Funds will offset losses from the drop in Vanguard Funds' long position.
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The idea behind Vanguard ESG Developed and Vanguard Funds Public pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Global Correlations module to find global opportunities by holding instruments from different markets.

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