Correlation Between Vanguard Health and Health Care
Can any of the company-specific risk be diversified away by investing in both Vanguard Health and Health Care 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 Health Care 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 Health Care Select, you can compare the effects of market volatilities on Vanguard Health and Health Care 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 Health Care. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Health and Health Care.
Diversification Opportunities for Vanguard Health and Health Care
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Vanguard and Health is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Health Care and Health Care Select in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Health Care Select 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 Health Care. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Health Care Select has no effect on the direction of Vanguard Health i.e., Vanguard Health and Health Care go up and down completely randomly.
Pair Corralation between Vanguard Health and Health Care
Considering the 90-day investment horizon Vanguard Health is expected to generate 1.03 times less return on investment than Health Care. But when comparing it to its historical volatility, Vanguard Health Care is 1.03 times less risky than Health Care. It trades about 0.25 of its potential returns per unit of risk. Health Care Select is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 14,043 in Health Care Select on November 9, 2024 and sell it today you would earn a total of 669.00 from holding Health Care Select or generate 4.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Health Care vs. Health Care Select
Performance |
| Timeline |
| Vanguard Health Care |
| Health Care Select |
Vanguard Health and Health Care Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Health and Health Care
The main advantage of trading using opposite Vanguard Health and Health Care positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Health position performs unexpectedly, Health Care 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 Health Care will offset losses from the drop in Health Care'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 |
| Health Care vs. Consumer Staples Select | Health Care vs. Industrial Select Sector | Health Care vs. Consumer Discretionary Select | Health Care vs. Utilities Select Sector |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
Other Complementary Tools
| USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. |