Correlation Between Vanguard LifeStrategy and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Vanguard LifeStrategy and Dow Jones 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 LifeStrategy and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard LifeStrategy 80 and Dow Jones Industrial, you can compare the effects of market volatilities on Vanguard LifeStrategy and Dow Jones 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 LifeStrategy with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard LifeStrategy and Dow Jones.
Diversification Opportunities for Vanguard LifeStrategy and Dow Jones
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vanguard and Dow is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard LifeStrategy 80 and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial and Vanguard LifeStrategy 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 LifeStrategy 80 are associated (or correlated) with Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Vanguard LifeStrategy i.e., Vanguard LifeStrategy and Dow Jones go up and down completely randomly.
Pair Corralation between Vanguard LifeStrategy and Dow Jones
Assuming the 90 days trading horizon Vanguard LifeStrategy is expected to generate 1.58 times less return on investment than Dow Jones. But when comparing it to its historical volatility, Vanguard LifeStrategy 80 is 1.52 times less risky than Dow Jones. It trades about 0.36 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest 4,176,346 in Dow Jones Industrial on September 1, 2024 and sell it today you would earn a total of 314,719 from holding Dow Jones Industrial or generate 7.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 91.3% |
| Values | Daily Returns |
Vanguard LifeStrategy 80 vs. Dow Jones Industrial
Performance |
| Timeline |
Vanguard LifeStrategy and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Vanguard LifeStrategy 80
Pair trading matchups for Vanguard LifeStrategy
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Vanguard LifeStrategy and Dow Jones
The main advantage of trading using opposite Vanguard LifeStrategy and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard LifeStrategy position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| Vanguard LifeStrategy vs. iShares Core MSCI | Vanguard LifeStrategy vs. BlackRock ESG Multi Asset | Vanguard LifeStrategy vs. Pershing Square Holdings | Vanguard LifeStrategy vs. ASML Holding NV |
| Dow Jones vs. Catalyst Pharmaceuticals | Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. National CineMedia | Dow Jones vs. Mink Therapeutics |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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