Correlation Between Vanguard 500 and Westwood Income
Can any of the company-specific risk be diversified away by investing in both Vanguard 500 and Westwood Income 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 Westwood Income 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 Westwood Income Opportunity, you can compare the effects of market volatilities on Vanguard 500 and Westwood Income 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 Westwood Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard 500 and Westwood Income.
Diversification Opportunities for Vanguard 500 and Westwood Income
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vanguard and Westwood is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard 500 Index and Westwood Income Opportunity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westwood Income Oppo 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 Westwood Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westwood Income Oppo has no effect on the direction of Vanguard 500 i.e., Vanguard 500 and Westwood Income go up and down completely randomly.
Pair Corralation between Vanguard 500 and Westwood Income
Assuming the 90 days horizon Vanguard 500 Index is expected to generate 1.99 times more return on investment than Westwood Income. However, Vanguard 500 is 1.99 times more volatile than Westwood Income Opportunity. It trades about 0.19 of its potential returns per unit of risk. Westwood Income Opportunity is currently generating about 0.19 per unit of risk. If you would invest 27,018 in Vanguard 500 Index on August 31, 2024 and sell it today you would earn a total of 2,386 from holding Vanguard 500 Index or generate 8.83% 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. Westwood Income Opportunity
Performance |
| Timeline |
| Vanguard 500 Index |
| Westwood Income Oppo |
Vanguard 500 and Westwood Income Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard 500 and Westwood Income
The main advantage of trading using opposite Vanguard 500 and Westwood Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard 500 position performs unexpectedly, Westwood Income 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 Westwood Income will offset losses from the drop in Westwood Income'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 |
| Westwood Income vs. California High Yield Municipal | Westwood Income vs. Alliancebernstein National Municipal | Westwood Income vs. Bbh Intermediate Municipal | Westwood Income vs. Morningstar Municipal 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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