Correlation Between Vanguard 500 and Vanguard Wellington
Can any of the company-specific risk be diversified away by investing in both Vanguard 500 and Vanguard Wellington 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 Vanguard Wellington 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 Vanguard Wellington Fund, you can compare the effects of market volatilities on Vanguard 500 and Vanguard Wellington 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 Vanguard Wellington. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard 500 and Vanguard Wellington.
Diversification Opportunities for Vanguard 500 and Vanguard Wellington
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between VANGUARD and Vanguard is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard 500 Index and Vanguard Wellington Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Wellington 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 Vanguard Wellington. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Wellington has no effect on the direction of Vanguard 500 i.e., Vanguard 500 and Vanguard Wellington go up and down completely randomly.
Pair Corralation between Vanguard 500 and Vanguard Wellington
Assuming the 90 days horizon Vanguard 500 Index is expected to generate 1.47 times more return on investment than Vanguard Wellington. However, Vanguard 500 is 1.47 times more volatile than Vanguard Wellington Fund. It trades about 0.15 of its potential returns per unit of risk. Vanguard Wellington Fund is currently generating about 0.14 per unit of risk. If you would invest 41,925 in Vanguard 500 Index on August 27, 2024 and sell it today you would earn a total of 13,259 from holding Vanguard 500 Index or generate 31.63% 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. Vanguard Wellington Fund
Performance |
| Timeline |
| Vanguard 500 Index |
| Vanguard Wellington |
Vanguard 500 and Vanguard Wellington Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard 500 and Vanguard Wellington
The main advantage of trading using opposite Vanguard 500 and Vanguard Wellington positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard 500 position performs unexpectedly, Vanguard Wellington 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 Wellington will offset losses from the drop in Vanguard Wellington'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 |
| Vanguard Wellington vs. Vanguard Wellesley Income | Vanguard Wellington vs. Vanguard Primecap Fund | Vanguard Wellington vs. Vanguard Health Care | Vanguard Wellington vs. Vanguard Windsor Ii |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
Other Complementary Tools
| Content Syndication Quickly integrate customizable finance content to your own investment portal | |
| Global Correlations Find global opportunities by holding instruments from different markets | |
| Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Fundamental Analysis View fundamental data based on most recent published financial statements | |
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets |