Correlation Between Vanguard Value and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Vanguard Value and Dow Jones 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 Value and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Value Factor and Dow Jones Industrial, you can compare the effects of market volatilities on Vanguard Value and Dow Jones 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 Value with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Value and Dow Jones.
Diversification Opportunities for Vanguard Value and Dow Jones
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vanguard and Dow is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Value Factor and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial and Vanguard Value 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 Value Factor are associated (or correlated) with Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Vanguard Value i.e., Vanguard Value and Dow Jones go up and down completely randomly.
Pair Corralation between Vanguard Value and Dow Jones
Given the investment horizon of 90 days Vanguard Value Factor is expected to generate 1.49 times more return on investment than Dow Jones. However, Vanguard Value is 1.49 times more volatile than Dow Jones Industrial. It trades about 0.2 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.27 per unit of risk. If you would invest 12,106 in Vanguard Value Factor on August 29, 2024 and sell it today you would earn a total of 761.00 from holding Vanguard Value Factor or generate 6.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Value Factor vs. Dow Jones Industrial
Performance |
| Timeline |
Vanguard Value and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Vanguard Value Factor
Pair trading matchups for Vanguard Value
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Vanguard Value and Dow Jones
The main advantage of trading using opposite Vanguard Value and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Value position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| Vanguard Value vs. Vanguard Quality Factor | Vanguard Value vs. Vanguard Momentum Factor | Vanguard Value vs. Vanguard Multifactor | Vanguard Value vs. Vanguard Minimum Volatility |
| Dow Jones vs. CECO Environmental Corp | Dow Jones vs. Western Acquisition Ventures | Dow Jones vs. Tyson Foods | Dow Jones vs. Inflection Point Acquisition |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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