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 Consumer 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 Consumer 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 Consumer 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
Considering the 90-day investment horizon Vanguard Consumer Staples is expected to generate 1.02 times more return on investment than Vanguard Industrials. However, Vanguard Consumer is 1.02 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 20,943 in Vanguard Consumer Staples on November 18, 2024 and sell it today you would earn a total of 1,172 from holding Vanguard Consumer Staples or generate 5.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Consumer Staples vs. Vanguard Industrials Index
Performance |
| Timeline |
| Vanguard Consumer 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. Vanguard Consumer Discretionary | Vanguard Consumer vs. Vanguard Utilities Index | Vanguard Consumer vs. Vanguard Industrials Index | Vanguard Consumer vs. Vanguard Materials Index |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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