Correlation Between Vanguard Health and Vanguard Energy
Can any of the company-specific risk be diversified away by investing in both Vanguard Health and Vanguard Energy 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 Health and Vanguard Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Health Care and Vanguard Energy Fund, you can compare the effects of market volatilities on Vanguard Health and Vanguard Energy 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 Health with a short position of Vanguard Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Health and Vanguard Energy.
Diversification Opportunities for Vanguard Health and Vanguard Energy
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Vanguard and Vanguard is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Health Care and Vanguard Energy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Energy and Vanguard Health 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 Health Care are associated (or correlated) with Vanguard Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Energy has no effect on the direction of Vanguard Health i.e., Vanguard Health and Vanguard Energy go up and down completely randomly.
Pair Corralation between Vanguard Health and Vanguard Energy
Assuming the 90 days horizon Vanguard Health Care is expected to under-perform the Vanguard Energy. But the mutual fund apears to be less risky and, when comparing its historical volatility, Vanguard Health Care is 1.41 times less risky than Vanguard Energy. The mutual fund trades about -0.01 of its potential returns per unit of risk. The Vanguard Energy Fund is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 8,245 in Vanguard Energy Fund on August 25, 2024 and sell it today you would earn a total of 1,684 from holding Vanguard Energy Fund or generate 20.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Health Care vs. Vanguard Energy Fund
Performance |
| Timeline |
| Vanguard Health Care |
| Vanguard Energy |
Vanguard Health and Vanguard Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Health and Vanguard Energy
The main advantage of trading using opposite Vanguard Health and Vanguard Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Health position performs unexpectedly, Vanguard Energy 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 Vanguard Energy will offset losses from the drop in Vanguard Energy's long position.| Vanguard Health vs. Vanguard Materials Index | Vanguard Health vs. Vanguard Limited Term Tax Exempt | Vanguard Health vs. Vanguard Limited Term Tax Exempt | Vanguard Health vs. Vanguard Global Minimum |
| Vanguard Energy vs. Vanguard Health Care | Vanguard Energy vs. Vanguard Global Capital | Vanguard Energy vs. Vanguard Energy Index | Vanguard Energy vs. Vanguard Energy 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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