Correlation Between Vanguard Consumer and Vanguard Industrials
Can any of the company-specific risk be diversified away by investing in both Vanguard Consumer and Vanguard Industrials 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 Consumer and Vanguard Industrials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Sumer Staples and Vanguard Industrials Index, you can compare the effects of market volatilities on Vanguard Consumer and Vanguard Industrials 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 Consumer with a short position of Vanguard Industrials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Consumer and Vanguard Industrials.
Diversification Opportunities for Vanguard Consumer and Vanguard Industrials
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Vanguard and Vanguard is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Sumer Staples and Vanguard Industrials Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Industrials and Vanguard Consumer 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 Sumer Staples are associated (or correlated) with Vanguard Industrials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Industrials has no effect on the direction of Vanguard Consumer i.e., Vanguard Consumer and Vanguard Industrials go up and down completely randomly.
Pair Corralation between Vanguard Consumer and Vanguard Industrials
Assuming the 90 days horizon Vanguard Sumer Staples is expected to generate 1.05 times more return on investment than Vanguard Industrials. However, Vanguard Consumer is 1.05 times more volatile than Vanguard Industrials Index. It trades about 0.3 of its potential returns per unit of risk. Vanguard Industrials Index is currently generating about -0.05 per unit of risk. If you would invest 10,332 in Vanguard Sumer Staples on November 18, 2024 and sell it today you would earn a total of 578.00 from holding Vanguard Sumer Staples or generate 5.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Sumer Staples vs. Vanguard Industrials Index
Performance |
| Timeline |
| Vanguard Sumer Staples |
| Vanguard Industrials |
Vanguard Consumer and Vanguard Industrials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Consumer and Vanguard Industrials
The main advantage of trading using opposite Vanguard Consumer and Vanguard Industrials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Consumer position performs unexpectedly, Vanguard Industrials 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 Industrials will offset losses from the drop in Vanguard Industrials' long position.| Vanguard Consumer vs. Intermediate Government Bond | Vanguard Consumer vs. Virtus Seix Government | Vanguard Consumer vs. Ridgeworth Seix Government | Vanguard Consumer vs. Fidelity Series Government |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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