Correlation Between Vanguard Extended and Government Street
Can any of the company-specific risk be diversified away by investing in both Vanguard Extended and Government Street 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 Extended and Government Street into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Extended Market and Government Street Mid Cap, you can compare the effects of market volatilities on Vanguard Extended and Government Street 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 Extended with a short position of Government Street. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Extended and Government Street.
Diversification Opportunities for Vanguard Extended and Government Street
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Vanguard and Government is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Extended Market and Government Street Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Government Street Mid and Vanguard Extended 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 Extended Market are associated (or correlated) with Government Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Government Street Mid has no effect on the direction of Vanguard Extended i.e., Vanguard Extended and Government Street go up and down completely randomly.
Pair Corralation between Vanguard Extended and Government Street
Assuming the 90 days horizon Vanguard Extended Market is expected to generate 1.27 times more return on investment than Government Street. However, Vanguard Extended is 1.27 times more volatile than Government Street Mid Cap. It trades about 0.17 of its potential returns per unit of risk. Government Street Mid Cap is currently generating about 0.19 per unit of risk. If you would invest 35,927 in Vanguard Extended Market on October 22, 2024 and sell it today you would earn a total of 1,046 from holding Vanguard Extended Market or generate 2.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Extended Market vs. Government Street Mid Cap
Performance |
| Timeline |
| Vanguard Extended Market |
| Government Street Mid |
Vanguard Extended and Government Street Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Extended and Government Street
The main advantage of trading using opposite Vanguard Extended and Government Street positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Extended position performs unexpectedly, Government Street 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 Government Street will offset losses from the drop in Government Street's long position.| Vanguard Extended vs. Franklin Emerging Market | Vanguard Extended vs. Eagle Mlp Strategy | Vanguard Extended vs. Boston Partners Emerging | Vanguard Extended vs. Black Oak Emerging |
| Government Street vs. Government Street Equity | Government Street vs. Federated Mdt Mid Cap | Government Street vs. Janus Enterprise Fund | Government Street vs. Victory Integrity Mid Cap |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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