Correlation Between Vanguard 500 and Nuveen Dow
Can any of the company-specific risk be diversified away by investing in both Vanguard 500 and Nuveen Dow 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 Nuveen Dow 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 Nuveen Dow 30, you can compare the effects of market volatilities on Vanguard 500 and Nuveen Dow 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 Nuveen Dow. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard 500 and Nuveen Dow.
Diversification Opportunities for Vanguard 500 and Nuveen Dow
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Vanguard and Nuveen is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard 500 Index and Nuveen Dow 30 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuveen Dow 30 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 Nuveen Dow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuveen Dow 30 has no effect on the direction of Vanguard 500 i.e., Vanguard 500 and Nuveen Dow go up and down completely randomly.
Pair Corralation between Vanguard 500 and Nuveen Dow
Assuming the 90 days horizon Vanguard 500 Index is expected to generate 1.14 times more return on investment than Nuveen Dow. However, Vanguard 500 is 1.14 times more volatile than Nuveen Dow 30. It trades about 0.13 of its potential returns per unit of risk. Nuveen Dow 30 is currently generating about 0.11 per unit of risk. If you would invest 48,568 in Vanguard 500 Index on September 1, 2024 and sell it today you would earn a total of 7,211 from holding Vanguard 500 Index or generate 14.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.21% |
| Values | Daily Returns |
Vanguard 500 Index vs. Nuveen Dow 30
Performance |
| Timeline |
| Vanguard 500 Index |
| Nuveen Dow 30 |
Vanguard 500 and Nuveen Dow Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard 500 and Nuveen Dow
The main advantage of trading using opposite Vanguard 500 and Nuveen Dow positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard 500 position performs unexpectedly, Nuveen Dow 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 Nuveen Dow will offset losses from the drop in Nuveen Dow'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 |
| Nuveen Dow vs. Vanguard Total Stock | Nuveen Dow vs. Vanguard 500 Index | Nuveen Dow vs. Vanguard Total Stock | Nuveen Dow vs. Vanguard Total Stock |
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.
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