Correlation Between Vanguard 500 and Stone Ridge
Can any of the company-specific risk be diversified away by investing in both Vanguard 500 and Stone Ridge 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 Stone Ridge 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 Stone Ridge Diversified, you can compare the effects of market volatilities on Vanguard 500 and Stone Ridge 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 Stone Ridge. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard 500 and Stone Ridge.
Diversification Opportunities for Vanguard 500 and Stone Ridge
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vanguard and Stone is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard 500 Index and Stone Ridge Diversified in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stone Ridge Diversified 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 Stone Ridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stone Ridge Diversified has no effect on the direction of Vanguard 500 i.e., Vanguard 500 and Stone Ridge go up and down completely randomly.
Pair Corralation between Vanguard 500 and Stone Ridge
Assuming the 90 days horizon Vanguard 500 Index is expected to generate 3.68 times more return on investment than Stone Ridge. However, Vanguard 500 is 3.68 times more volatile than Stone Ridge Diversified. It trades about 0.13 of its potential returns per unit of risk. Stone Ridge Diversified is currently generating about 0.22 per unit of risk. If you would invest 48,543 in Vanguard 500 Index on September 1, 2024 and sell it today you would earn a total of 6,920 from holding Vanguard 500 Index or generate 14.26% 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. Stone Ridge Diversified
Performance |
| Timeline |
| Vanguard 500 Index |
| Stone Ridge Diversified |
Vanguard 500 and Stone Ridge Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard 500 and Stone Ridge
The main advantage of trading using opposite Vanguard 500 and Stone Ridge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard 500 position performs unexpectedly, Stone Ridge 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 Stone Ridge will offset losses from the drop in Stone Ridge'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 |
| Stone Ridge vs. Strategic Allocation Aggressive | Stone Ridge vs. Ab High Income | Stone Ridge vs. Western Asset High | Stone Ridge vs. T Rowe Price |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
Other Complementary Tools
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| Global Markets Map Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| Headlines Timeline Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity |