Correlation Between Vanguard 500 and Cliffwater Enhanced
Can any of the company-specific risk be diversified away by investing in both Vanguard 500 and Cliffwater Enhanced 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 Cliffwater Enhanced 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 Cliffwater Enhanced Lending, you can compare the effects of market volatilities on Vanguard 500 and Cliffwater Enhanced 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 Cliffwater Enhanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard 500 and Cliffwater Enhanced.
Diversification Opportunities for Vanguard 500 and Cliffwater Enhanced
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vanguard and Cliffwater is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard 500 Index and Cliffwater Enhanced Lending in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cliffwater Enhanced 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 Cliffwater Enhanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cliffwater Enhanced has no effect on the direction of Vanguard 500 i.e., Vanguard 500 and Cliffwater Enhanced go up and down completely randomly.
Pair Corralation between Vanguard 500 and Cliffwater Enhanced
Assuming the 90 days horizon Vanguard 500 Index is expected to generate 8.21 times more return on investment than Cliffwater Enhanced. However, Vanguard 500 is 8.21 times more volatile than Cliffwater Enhanced Lending. It trades about 0.17 of its potential returns per unit of risk. Cliffwater Enhanced Lending is currently generating about 0.7 per unit of risk. If you would invest 54,969 in Vanguard 500 Index on September 15, 2024 and sell it today you would earn a total of 1,017 from holding Vanguard 500 Index or generate 1.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard 500 Index vs. Cliffwater Enhanced Lending
Performance |
| Timeline |
| Vanguard 500 Index |
| Cliffwater Enhanced |
Vanguard 500 and Cliffwater Enhanced Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard 500 and Cliffwater Enhanced
The main advantage of trading using opposite Vanguard 500 and Cliffwater Enhanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard 500 position performs unexpectedly, Cliffwater Enhanced 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 Cliffwater Enhanced will offset losses from the drop in Cliffwater Enhanced's long position.| Vanguard 500 vs. Vanguard Total International | Vanguard 500 vs. Vanguard Total Bond | Vanguard 500 vs. Vanguard Small Cap Index | Vanguard 500 vs. Vanguard Reit Index |
| Cliffwater Enhanced vs. Vanguard Total Stock | Cliffwater Enhanced vs. Vanguard 500 Index | Cliffwater Enhanced vs. Vanguard Total Stock | Cliffwater Enhanced vs. Vanguard Total Stock |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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