Correlation Between Vanguard Health and Putnam Biorevolution
Can any of the company-specific risk be diversified away by investing in both Vanguard Health and Putnam Biorevolution 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 Putnam Biorevolution 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 Putnam Biorevolution ETF, you can compare the effects of market volatilities on Vanguard Health and Putnam Biorevolution 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 Putnam Biorevolution. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Health and Putnam Biorevolution.
Diversification Opportunities for Vanguard Health and Putnam Biorevolution
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Vanguard and Putnam is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Health Care and Putnam Biorevolution ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putnam Biorevolution ETF 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 Putnam Biorevolution. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Putnam Biorevolution ETF has no effect on the direction of Vanguard Health i.e., Vanguard Health and Putnam Biorevolution go up and down completely randomly.
Pair Corralation between Vanguard Health and Putnam Biorevolution
Considering the 90-day investment horizon Vanguard Health Care is expected to generate 0.82 times more return on investment than Putnam Biorevolution. However, Vanguard Health Care is 1.22 times less risky than Putnam Biorevolution. It trades about 0.01 of its potential returns per unit of risk. Putnam Biorevolution ETF is currently generating about -0.18 per unit of risk. If you would invest 27,180 in Vanguard Health Care on November 28, 2024 and sell it today you would earn a total of 24.00 from holding Vanguard Health Care or generate 0.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Health Care vs. Putnam Biorevolution ETF
Performance |
| Timeline |
| Vanguard Health Care |
| Putnam Biorevolution ETF |
Vanguard Health and Putnam Biorevolution Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Health and Putnam Biorevolution
The main advantage of trading using opposite Vanguard Health and Putnam Biorevolution positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Health position performs unexpectedly, Putnam Biorevolution 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 Putnam Biorevolution will offset losses from the drop in Putnam Biorevolution's long position.| Vanguard Health vs. Vanguard Consumer Staples | Vanguard Health vs. Vanguard Financials Index | Vanguard Health vs. Vanguard Information Technology | Vanguard Health vs. Vanguard Consumer Discretionary |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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