Correlation Between Vanguard Total and Vanguard Balanced
Can any of the company-specific risk be diversified away by investing in both Vanguard Total and Vanguard Balanced 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 Total and Vanguard Balanced into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Total Bond and Vanguard Balanced Index, you can compare the effects of market volatilities on Vanguard Total and Vanguard Balanced 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 Total with a short position of Vanguard Balanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Total and Vanguard Balanced.
Diversification Opportunities for Vanguard Total and Vanguard Balanced
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Vanguard and Vanguard is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Bond and Vanguard Balanced Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Balanced Index and Vanguard Total 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 Total Bond are associated (or correlated) with Vanguard Balanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Balanced Index has no effect on the direction of Vanguard Total i.e., Vanguard Total and Vanguard Balanced go up and down completely randomly.
Pair Corralation between Vanguard Total and Vanguard Balanced
Assuming the 90 days horizon Vanguard Total is expected to generate 4.77 times less return on investment than Vanguard Balanced. But when comparing it to its historical volatility, Vanguard Total Bond is 1.37 times less risky than Vanguard Balanced. It trades about 0.03 of its potential returns per unit of risk. Vanguard Balanced Index is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 3,907 in Vanguard Balanced Index on September 5, 2024 and sell it today you would earn a total of 1,235 from holding Vanguard Balanced Index or generate 31.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Vanguard Total Bond vs. Vanguard Balanced Index
Performance |
| Timeline |
| Vanguard Total Bond |
| Vanguard Balanced Index |
Vanguard Total and Vanguard Balanced Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Total and Vanguard Balanced
The main advantage of trading using opposite Vanguard Total and Vanguard Balanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Total position performs unexpectedly, Vanguard Balanced 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 Balanced will offset losses from the drop in Vanguard Balanced's long position.| Vanguard Total vs. Vanguard Total International | Vanguard Total vs. Vanguard Total Stock | Vanguard Total vs. Vanguard Small Cap Index | Vanguard Total vs. Vanguard 500 Index |
| Vanguard Balanced vs. Vanguard Wellesley Income | Vanguard Balanced vs. Vanguard Extended Market | Vanguard Balanced vs. Vanguard Value Index | Vanguard Balanced vs. Vanguard Total Bond |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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