Correlation Between Vanguard Financials and Vanguard Growth
Can any of the company-specific risk be diversified away by investing in both Vanguard Financials and Vanguard Growth 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 Financials and Vanguard Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Financials Index and Vanguard Growth Index, you can compare the effects of market volatilities on Vanguard Financials and Vanguard Growth 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 Financials with a short position of Vanguard Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Financials and Vanguard Growth.
Diversification Opportunities for Vanguard Financials and Vanguard Growth
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vanguard and Vanguard is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Financials Index and Vanguard Growth Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Growth Index and Vanguard Financials 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 Financials Index are associated (or correlated) with Vanguard Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Growth Index has no effect on the direction of Vanguard Financials i.e., Vanguard Financials and Vanguard Growth go up and down completely randomly.
Pair Corralation between Vanguard Financials and Vanguard Growth
Considering the 90-day investment horizon Vanguard Financials Index is expected to generate 1.48 times more return on investment than Vanguard Growth. However, Vanguard Financials is 1.48 times more volatile than Vanguard Growth Index. It trades about 0.26 of its potential returns per unit of risk. Vanguard Growth Index is currently generating about 0.13 per unit of risk. If you would invest 11,489 in Vanguard Financials Index on August 28, 2024 and sell it today you would earn a total of 1,089 from holding Vanguard Financials Index or generate 9.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Financials Index vs. Vanguard Growth Index
Performance |
| Timeline |
| Vanguard Financials Index |
| Vanguard Growth Index |
Vanguard Financials and Vanguard Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Financials and Vanguard Growth
The main advantage of trading using opposite Vanguard Financials and Vanguard Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Financials position performs unexpectedly, Vanguard Growth 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 Vanguard Growth will offset losses from the drop in Vanguard Growth's long position.| Vanguard Financials vs. Vanguard Industrials Index | Vanguard Financials vs. Vanguard Consumer Discretionary | Vanguard Financials vs. Vanguard Materials Index | Vanguard Financials vs. Vanguard Health Care |
| Vanguard Growth vs. Vanguard Value Index | Vanguard Growth vs. Vanguard Information Technology | Vanguard Growth vs. Vanguard Small Cap Growth | Vanguard Growth vs. Vanguard Dividend Appreciation |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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