Correlation Between Vanguard 500 and New Alternatives
Can any of the company-specific risk be diversified away by investing in both Vanguard 500 and New Alternatives 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 New Alternatives 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 New Alternatives Fund, you can compare the effects of market volatilities on Vanguard 500 and New Alternatives 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 New Alternatives. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard 500 and New Alternatives.
Diversification Opportunities for Vanguard 500 and New Alternatives
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Vanguard and New is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard 500 Index and New Alternatives Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Alternatives 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 New Alternatives. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Alternatives has no effect on the direction of Vanguard 500 i.e., Vanguard 500 and New Alternatives go up and down completely randomly.
Pair Corralation between Vanguard 500 and New Alternatives
Assuming the 90 days horizon Vanguard 500 Index is expected to generate 0.68 times more return on investment than New Alternatives. However, Vanguard 500 Index is 1.47 times less risky than New Alternatives. It trades about 0.13 of its potential returns per unit of risk. New Alternatives Fund is currently generating about -0.01 per unit of risk. If you would invest 37,457 in Vanguard 500 Index on August 30, 2024 and sell it today you would earn a total of 17,895 from holding Vanguard 500 Index or generate 47.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard 500 Index vs. New Alternatives Fund
Performance |
| Timeline |
| Vanguard 500 Index |
| New Alternatives |
Vanguard 500 and New Alternatives Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard 500 and New Alternatives
The main advantage of trading using opposite Vanguard 500 and New Alternatives positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard 500 position performs unexpectedly, New Alternatives 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 New Alternatives will offset losses from the drop in New Alternatives' 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 |
| New Alternatives vs. Blackrock Sm Cap | New Alternatives vs. Delaware Limited Term Diversified | New Alternatives vs. T Rowe Price | New Alternatives vs. Tiaa Cref Small Cap Blend |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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