Correlation Between Vanguard 500 and Kensington Defender
Can any of the company-specific risk be diversified away by investing in both Vanguard 500 and Kensington Defender 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 500 and Kensington Defender into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard 500 Index and Kensington Defender Institutional, you can compare the effects of market volatilities on Vanguard 500 and Kensington Defender 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 500 with a short position of Kensington Defender. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard 500 and Kensington Defender.
Diversification Opportunities for Vanguard 500 and Kensington Defender
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Vanguard and Kensington is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard 500 Index and Kensington Defender Institutio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kensington Defender and Vanguard 500 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 500 Index are associated (or correlated) with Kensington Defender. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kensington Defender has no effect on the direction of Vanguard 500 i.e., Vanguard 500 and Kensington Defender go up and down completely randomly.
Pair Corralation between Vanguard 500 and Kensington Defender
Assuming the 90 days horizon Vanguard 500 Index is expected to generate 1.2 times more return on investment than Kensington Defender. However, Vanguard 500 is 1.2 times more volatile than Kensington Defender Institutional. It trades about 0.09 of its potential returns per unit of risk. Kensington Defender Institutional is currently generating about 0.02 per unit of risk. If you would invest 25,650 in Vanguard 500 Index on November 28, 2024 and sell it today you would earn a total of 3,539 from holding Vanguard 500 Index or generate 13.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard 500 Index vs. Kensington Defender Institutio
Performance |
| Timeline |
| Vanguard 500 Index |
| Kensington Defender |
Vanguard 500 and Kensington Defender Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard 500 and Kensington Defender
The main advantage of trading using opposite Vanguard 500 and Kensington Defender positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard 500 position performs unexpectedly, Kensington Defender 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 Kensington Defender will offset losses from the drop in Kensington Defender's long position.| Vanguard 500 vs. College Retirement Equities | Vanguard 500 vs. Wisdomtree Siegel Moderate | Vanguard 500 vs. Blackrock Moderate Prepared | Vanguard 500 vs. Vanguard Target Retirement |
| Kensington Defender vs. Glg Intl Small | Kensington Defender vs. T Rowe Price | Kensington Defender vs. Federated Government Income | Kensington Defender vs. Gmo Quality Fund |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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