Correlation Between Vanguard Growth and State Street
Can any of the company-specific risk be diversified away by investing in both Vanguard Growth and State Street 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 Growth and State Street into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Growth Index and State Street Smallmid, you can compare the effects of market volatilities on Vanguard Growth and State Street 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 Growth with a short position of State Street. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Growth and State Street.
Diversification Opportunities for Vanguard Growth and State Street
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Vanguard and State is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Growth Index and State Street Smallmid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Street Smallmid and Vanguard Growth 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 Growth Index are associated (or correlated) with State Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of State Street Smallmid has no effect on the direction of Vanguard Growth i.e., Vanguard Growth and State Street go up and down completely randomly.
Pair Corralation between Vanguard Growth and State Street
Assuming the 90 days horizon Vanguard Growth is expected to generate 2.87 times less return on investment than State Street. But when comparing it to its historical volatility, Vanguard Growth Index is 1.22 times less risky than State Street. It trades about 0.14 of its potential returns per unit of risk. State Street Smallmid is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest 32,318 in State Street Smallmid on August 25, 2024 and sell it today you would earn a total of 3,289 from holding State Street Smallmid or generate 10.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Growth Index vs. State Street Smallmid
Performance |
| Timeline |
| Vanguard Growth Index |
| State Street Smallmid |
Vanguard Growth and State Street Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Growth and State Street
The main advantage of trading using opposite Vanguard Growth and State Street positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Growth position performs unexpectedly, State Street 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 State Street will offset losses from the drop in State Street's long position.| Vanguard Growth vs. Vanguard Value Index | Vanguard Growth vs. Vanguard Mid Cap Index | Vanguard Growth vs. Vanguard Small Cap Growth | Vanguard Growth vs. Vanguard 500 Index |
| State Street vs. L Abbett Growth | State Street vs. Rational Defensive Growth | State Street vs. Pioneer Fundamental Growth | State Street vs. Pace Smallmedium Growth |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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