Correlation Between Vanguard 500 and Teton Westwood
Can any of the company-specific risk be diversified away by investing in both Vanguard 500 and Teton Westwood 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 Teton Westwood 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 Teton Westwood Balanced, you can compare the effects of market volatilities on Vanguard 500 and Teton Westwood 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 Teton Westwood. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard 500 and Teton Westwood.
Diversification Opportunities for Vanguard 500 and Teton Westwood
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vanguard and TETON is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard 500 Index and Teton Westwood Balanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teton Westwood Balanced 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 Teton Westwood. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teton Westwood Balanced has no effect on the direction of Vanguard 500 i.e., Vanguard 500 and Teton Westwood go up and down completely randomly.
Pair Corralation between Vanguard 500 and Teton Westwood
Assuming the 90 days horizon Vanguard 500 Index is expected to generate 0.61 times more return on investment than Teton Westwood. However, Vanguard 500 Index is 1.64 times less risky than Teton Westwood. It trades about 0.18 of its potential returns per unit of risk. Teton Westwood Balanced is currently generating about -0.1 per unit of risk. If you would invest 28,460 in Vanguard 500 Index on August 31, 2024 and sell it today you would earn a total of 944.00 from holding Vanguard 500 Index or generate 3.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard 500 Index vs. Teton Westwood Balanced
Performance |
| Timeline |
| Vanguard 500 Index |
| Teton Westwood Balanced |
Vanguard 500 and Teton Westwood Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard 500 and Teton Westwood
The main advantage of trading using opposite Vanguard 500 and Teton Westwood positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard 500 position performs unexpectedly, Teton Westwood 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 Teton Westwood will offset losses from the drop in Teton Westwood's long position.| Vanguard 500 vs. Vanguard Materials Index | Vanguard 500 vs. Vanguard Limited Term Tax Exempt | Vanguard 500 vs. Vanguard Limited Term Tax Exempt | Vanguard 500 vs. Vanguard Global Minimum |
| Teton Westwood vs. Blrc Sgy Mnp | Teton Westwood vs. Thrivent Income Fund | Teton Westwood vs. Bbh Intermediate Municipal | Teton Westwood vs. Maryland Tax Free Bond |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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