Correlation Between Vanguard 500 and Guardian Fundamental
Can any of the company-specific risk be diversified away by investing in both Vanguard 500 and Guardian Fundamental 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 Guardian Fundamental 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 Guardian Fundamental Global, you can compare the effects of market volatilities on Vanguard 500 and Guardian Fundamental 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 Guardian Fundamental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard 500 and Guardian Fundamental.
Diversification Opportunities for Vanguard 500 and Guardian Fundamental
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vanguard and Guardian is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard 500 Index and Guardian Fundamental Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guardian Fundamental 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 Guardian Fundamental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guardian Fundamental has no effect on the direction of Vanguard 500 i.e., Vanguard 500 and Guardian Fundamental go up and down completely randomly.
Pair Corralation between Vanguard 500 and Guardian Fundamental
Assuming the 90 days horizon Vanguard 500 Index is expected to generate 1.19 times more return on investment than Guardian Fundamental. However, Vanguard 500 is 1.19 times more volatile than Guardian Fundamental Global. It trades about 0.11 of its potential returns per unit of risk. Guardian Fundamental Global is currently generating about 0.07 per unit of risk. If you would invest 35,910 in Vanguard 500 Index on September 1, 2024 and sell it today you would earn a total of 19,869 from holding Vanguard 500 Index or generate 55.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Vanguard 500 Index vs. Guardian Fundamental Global
Performance |
| Timeline |
| Vanguard 500 Index |
| Guardian Fundamental |
Vanguard 500 and Guardian Fundamental Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard 500 and Guardian Fundamental
The main advantage of trading using opposite Vanguard 500 and Guardian Fundamental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard 500 position performs unexpectedly, Guardian Fundamental 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 Guardian Fundamental will offset losses from the drop in Guardian Fundamental's long position.| Vanguard 500 vs. Vanguard Total Bond | Vanguard 500 vs. Vanguard Small Cap Index | Vanguard 500 vs. Vanguard Mid Cap Index | Vanguard 500 vs. Vanguard Extended Market |
| Guardian Fundamental vs. Guardian Dividend Growth | Guardian Fundamental vs. Equity Growth Fund | Guardian Fundamental vs. Putnam High Income | Guardian Fundamental vs. Fidelity Advisor Technology |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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