Correlation Between Vanguard Star and Vanguard Wellington
Can any of the company-specific risk be diversified away by investing in both Vanguard Star and Vanguard Wellington 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 Star and Vanguard Wellington into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Star Fund and Vanguard Wellington Fund, you can compare the effects of market volatilities on Vanguard Star and Vanguard Wellington 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 Star with a short position of Vanguard Wellington. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Star and Vanguard Wellington.
Diversification Opportunities for Vanguard Star and Vanguard Wellington
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Vanguard and Vanguard is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Star Fund and Vanguard Wellington Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Wellington and Vanguard Star 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 Star Fund are associated (or correlated) with Vanguard Wellington. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Wellington has no effect on the direction of Vanguard Star i.e., Vanguard Star and Vanguard Wellington go up and down completely randomly.
Pair Corralation between Vanguard Star and Vanguard Wellington
Assuming the 90 days horizon Vanguard Star is expected to generate 1.08 times less return on investment than Vanguard Wellington. In addition to that, Vanguard Star is 1.1 times more volatile than Vanguard Wellington Fund. It trades about 0.09 of its total potential returns per unit of risk. Vanguard Wellington Fund is currently generating about 0.1 per unit of volatility. If you would invest 3,641 in Vanguard Wellington Fund on September 2, 2024 and sell it today you would earn a total of 1,119 from holding Vanguard Wellington Fund or generate 30.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Star Fund vs. Vanguard Wellington Fund
Performance |
| Timeline |
| Vanguard Star |
| Vanguard Wellington |
Vanguard Star and Vanguard Wellington Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Star and Vanguard Wellington
The main advantage of trading using opposite Vanguard Star and Vanguard Wellington positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Star position performs unexpectedly, Vanguard Wellington 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 Wellington will offset losses from the drop in Vanguard Wellington's long position.| Vanguard Star vs. Vanguard Wellington Fund | Vanguard Star vs. Vanguard Wellesley Income | Vanguard Star vs. Vanguard Windsor Ii | Vanguard Star vs. Vanguard Health Care |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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