Correlation Between Vanguard Equity and Stone Harbor
Can any of the company-specific risk be diversified away by investing in both Vanguard Equity and Stone Harbor 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 Equity and Stone Harbor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Equity Income and Stone Harbor Emerging, you can compare the effects of market volatilities on Vanguard Equity and Stone Harbor 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 Equity with a short position of Stone Harbor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Equity and Stone Harbor.
Diversification Opportunities for Vanguard Equity and Stone Harbor
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Vanguard and Stone is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Equity Income and Stone Harbor Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stone Harbor Emerging and Vanguard Equity 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 Equity Income are associated (or correlated) with Stone Harbor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stone Harbor Emerging has no effect on the direction of Vanguard Equity i.e., Vanguard Equity and Stone Harbor go up and down completely randomly.
Pair Corralation between Vanguard Equity and Stone Harbor
Assuming the 90 days horizon Vanguard Equity is expected to generate 1.15 times less return on investment than Stone Harbor. In addition to that, Vanguard Equity is 1.95 times more volatile than Stone Harbor Emerging. It trades about 0.06 of its total potential returns per unit of risk. Stone Harbor Emerging is currently generating about 0.12 per unit of volatility. If you would invest 600.00 in Stone Harbor Emerging on September 12, 2024 and sell it today you would earn a total of 156.00 from holding Stone Harbor Emerging or generate 26.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Equity Income vs. Stone Harbor Emerging
Performance |
| Timeline |
| Vanguard Equity Income |
| Stone Harbor Emerging |
Vanguard Equity and Stone Harbor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Equity and Stone Harbor
The main advantage of trading using opposite Vanguard Equity and Stone Harbor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Equity position performs unexpectedly, Stone Harbor 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 Stone Harbor will offset losses from the drop in Stone Harbor's long position.| Vanguard Equity vs. Vanguard Dividend Growth | Vanguard Equity vs. Vanguard Wellesley Income | Vanguard Equity vs. Vanguard Wellington Fund | Vanguard Equity vs. Vanguard Growth And |
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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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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