Correlation Between Vanguard 500 and The Jensen
Can any of the company-specific risk be diversified away by investing in both Vanguard 500 and The Jensen 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 The Jensen 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 The Jensen Portfolio, you can compare the effects of market volatilities on Vanguard 500 and The Jensen 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 The Jensen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard 500 and The Jensen.
Diversification Opportunities for Vanguard 500 and The Jensen
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Vanguard and The is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard 500 Index and The Jensen Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jensen Portfolio 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 The Jensen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jensen Portfolio has no effect on the direction of Vanguard 500 i.e., Vanguard 500 and The Jensen go up and down completely randomly.
Pair Corralation between Vanguard 500 and The Jensen
Assuming the 90 days horizon Vanguard 500 Index is expected to generate 0.38 times more return on investment than The Jensen. However, Vanguard 500 Index is 2.66 times less risky than The Jensen. It trades about 0.16 of its potential returns per unit of risk. The Jensen Portfolio is currently generating about -0.14 per unit of risk. If you would invest 53,778 in Vanguard 500 Index on August 29, 2024 and sell it today you would earn a total of 1,574 from holding Vanguard 500 Index or generate 2.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Vanguard 500 Index vs. The Jensen Portfolio
Performance |
| Timeline |
| Vanguard 500 Index |
| Jensen Portfolio |
Vanguard 500 and The Jensen Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard 500 and The Jensen
The main advantage of trading using opposite Vanguard 500 and The Jensen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard 500 position performs unexpectedly, The Jensen 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 The Jensen will offset losses from the drop in The Jensen's long position.| Vanguard 500 vs. Vanguard Total Stock | Vanguard 500 vs. Vanguard Total Bond | Vanguard 500 vs. Vanguard Windsor Ii | Vanguard 500 vs. Vanguard Small Cap Index |
| The Jensen vs. Clipper Fund Inc | The Jensen vs. Parnassus E Equity | The Jensen vs. Mairs Power Growth | The Jensen vs. Sound Shore Fund |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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