Correlation Between Vanguard Health and Vanguard Consumer
Can any of the company-specific risk be diversified away by investing in both Vanguard Health and Vanguard Consumer 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 Consumer 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 Consumer Discretionary, you can compare the effects of market volatilities on Vanguard Health and Vanguard Consumer 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 Consumer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Health and Vanguard Consumer.
Diversification Opportunities for Vanguard Health and Vanguard Consumer
-0.75 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Vanguard and Vanguard is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Health Care and Vanguard Consumer Discretionar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Consumer 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 Consumer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Consumer has no effect on the direction of Vanguard Health i.e., Vanguard Health and Vanguard Consumer go up and down completely randomly.
Pair Corralation between Vanguard Health and Vanguard Consumer
Considering the 90-day investment horizon Vanguard Health Care is expected to under-perform the Vanguard Consumer. But the etf apears to be less risky and, when comparing its historical volatility, Vanguard Health Care is 1.41 times less risky than Vanguard Consumer. The etf trades about -0.15 of its potential returns per unit of risk. The Vanguard Consumer Discretionary is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest 34,065 in Vanguard Consumer Discretionary on August 27, 2024 and sell it today you would earn a total of 2,785 from holding Vanguard Consumer Discretionary or generate 8.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Health Care vs. Vanguard Consumer Discretionar
Performance |
| Timeline |
| Vanguard Health Care |
| Vanguard Consumer |
Vanguard Health and Vanguard Consumer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Health and Vanguard Consumer
The main advantage of trading using opposite Vanguard Health and Vanguard Consumer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Health position performs unexpectedly, Vanguard Consumer 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 Consumer will offset losses from the drop in Vanguard Consumer'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 |
| Vanguard Consumer vs. VanEck Pharmaceutical ETF | Vanguard Consumer vs. VanEck Biotech ETF | Vanguard Consumer vs. VanEck Oil Services | Vanguard Consumer vs. iShares Transportation Average |
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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