Correlation Between Vanguard 500 and Eaton Vance
Can any of the company-specific risk be diversified away by investing in both Vanguard 500 and Eaton Vance 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 Eaton Vance 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 Eaton Vance Tax Managed, you can compare the effects of market volatilities on Vanguard 500 and Eaton Vance 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 Eaton Vance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard 500 and Eaton Vance.
Diversification Opportunities for Vanguard 500 and Eaton Vance
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vanguard and Eaton is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard 500 Index and Eaton Vance Tax Managed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eaton Vance Tax 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 Eaton Vance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eaton Vance Tax has no effect on the direction of Vanguard 500 i.e., Vanguard 500 and Eaton Vance go up and down completely randomly.
Pair Corralation between Vanguard 500 and Eaton Vance
Assuming the 90 days horizon Vanguard 500 is expected to generate 1.01 times less return on investment than Eaton Vance. But when comparing it to its historical volatility, Vanguard 500 Index is 1.01 times less risky than Eaton Vance. It trades about 0.11 of its potential returns per unit of risk. Eaton Vance Tax Managed is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 6,935 in Eaton Vance Tax Managed on September 4, 2024 and sell it today you would earn a total of 3,881 from holding Eaton Vance Tax Managed or generate 55.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.8% |
| Values | Daily Returns |
Vanguard 500 Index vs. Eaton Vance Tax Managed
Performance |
| Timeline |
| Vanguard 500 Index |
| Eaton Vance Tax |
Vanguard 500 and Eaton Vance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard 500 and Eaton Vance
The main advantage of trading using opposite Vanguard 500 and Eaton Vance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard 500 position performs unexpectedly, Eaton Vance 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 Eaton Vance will offset losses from the drop in Eaton Vance's long position.| Vanguard 500 vs. Vanguard Total Stock | Vanguard 500 vs. Vanguard Mid Cap Index | Vanguard 500 vs. Vanguard Small Cap Index | Vanguard 500 vs. Vanguard Total Bond |
| Eaton Vance vs. Eaton Vance Msschsts | Eaton Vance vs. Eaton Vance Municipal | Eaton Vance vs. Eaton Vance Municipal | Eaton Vance vs. Eaton Vance Municipal |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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