Correlation Between Vanguard 500 and Fuller Thaler
Can any of the company-specific risk be diversified away by investing in both Vanguard 500 and Fuller Thaler 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 Fuller Thaler 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 Fuller Thaler Behavioral, you can compare the effects of market volatilities on Vanguard 500 and Fuller Thaler 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 Fuller Thaler. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard 500 and Fuller Thaler.
Diversification Opportunities for Vanguard 500 and Fuller Thaler
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between VANGUARD and Fuller is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard 500 Index and Fuller Thaler Behavioral in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fuller Thaler Behavioral 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 Fuller Thaler. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fuller Thaler Behavioral has no effect on the direction of Vanguard 500 i.e., Vanguard 500 and Fuller Thaler go up and down completely randomly.
Pair Corralation between Vanguard 500 and Fuller Thaler
Assuming the 90 days horizon Vanguard 500 is expected to generate 2.47 times less return on investment than Fuller Thaler. But when comparing it to its historical volatility, Vanguard 500 Index is 1.39 times less risky than Fuller Thaler. It trades about 0.14 of its potential returns per unit of risk. Fuller Thaler Behavioral is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 3,900 in Fuller Thaler Behavioral on August 29, 2024 and sell it today you would earn a total of 259.00 from holding Fuller Thaler Behavioral or generate 6.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard 500 Index vs. Fuller Thaler Behavioral
Performance |
| Timeline |
| Vanguard 500 Index |
| Fuller Thaler Behavioral |
Vanguard 500 and Fuller Thaler Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard 500 and Fuller Thaler
The main advantage of trading using opposite Vanguard 500 and Fuller Thaler positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard 500 position performs unexpectedly, Fuller Thaler 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 Fuller Thaler will offset losses from the drop in Fuller Thaler'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 |
| Fuller Thaler vs. Fuller Thaler Behavioral | Fuller Thaler vs. Fuller Thaler Behavioral | Fuller Thaler vs. Fuller Thaler Behavioral | Fuller Thaler vs. Fuller Thaler Behavioral |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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