Correlation Between Vanguard Selected and Vanguard Wellesley
Can any of the company-specific risk be diversified away by investing in both Vanguard Selected and Vanguard Wellesley 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 Selected and Vanguard Wellesley into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Selected Value and Vanguard Wellesley Income, you can compare the effects of market volatilities on Vanguard Selected and Vanguard Wellesley 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 Selected with a short position of Vanguard Wellesley. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Selected and Vanguard Wellesley.
Diversification Opportunities for Vanguard Selected and Vanguard Wellesley
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Vanguard and Vanguard is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Selected Value and Vanguard Wellesley Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Wellesley Income and Vanguard Selected 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 Selected Value are associated (or correlated) with Vanguard Wellesley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Wellesley Income has no effect on the direction of Vanguard Selected i.e., Vanguard Selected and Vanguard Wellesley go up and down completely randomly.
Pair Corralation between Vanguard Selected and Vanguard Wellesley
Assuming the 90 days horizon Vanguard Selected Value is expected to generate 2.41 times more return on investment than Vanguard Wellesley. However, Vanguard Selected is 2.41 times more volatile than Vanguard Wellesley Income. It trades about 0.06 of its potential returns per unit of risk. Vanguard Wellesley Income is currently generating about 0.07 per unit of risk. If you would invest 2,563 in Vanguard Selected Value on August 28, 2024 and sell it today you would earn a total of 790.00 from holding Vanguard Selected Value or generate 30.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.79% |
| Values | Daily Returns |
Vanguard Selected Value vs. Vanguard Wellesley Income
Performance |
| Timeline |
| Vanguard Selected Value |
| Vanguard Wellesley Income |
Vanguard Selected and Vanguard Wellesley Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Selected and Vanguard Wellesley
The main advantage of trading using opposite Vanguard Selected and Vanguard Wellesley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Selected position performs unexpectedly, Vanguard Wellesley 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 Wellesley will offset losses from the drop in Vanguard Wellesley's long position.| Vanguard Selected vs. Vanguard Materials Index | Vanguard Selected vs. Vanguard Limited Term Tax Exempt | Vanguard Selected vs. Vanguard Limited Term Tax Exempt | Vanguard Selected vs. Vanguard Global Minimum |
| Vanguard Wellesley vs. Vanguard Wellington Fund | Vanguard Wellesley vs. Vanguard Dividend Growth | Vanguard Wellesley vs. Vanguard Gnma Fund | Vanguard Wellesley vs. Vanguard Equity Income |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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