Correlation Between Vanguard Growth and Vanguard Lifestrategy
Can any of the company-specific risk be diversified away by investing in both Vanguard Growth and Vanguard Lifestrategy 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 Vanguard Lifestrategy 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 Vanguard Lifestrategy Moderate, you can compare the effects of market volatilities on Vanguard Growth and Vanguard Lifestrategy 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 Vanguard Lifestrategy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Growth and Vanguard Lifestrategy.
Diversification Opportunities for Vanguard Growth and Vanguard Lifestrategy
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vanguard and Vanguard is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Growth Index and Vanguard Lifestrategy Moderate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Lifestrategy 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 Vanguard Lifestrategy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Lifestrategy has no effect on the direction of Vanguard Growth i.e., Vanguard Growth and Vanguard Lifestrategy go up and down completely randomly.
Pair Corralation between Vanguard Growth and Vanguard Lifestrategy
Assuming the 90 days horizon Vanguard Growth Index is expected to generate 2.37 times more return on investment than Vanguard Lifestrategy. However, Vanguard Growth is 2.37 times more volatile than Vanguard Lifestrategy Moderate. It trades about 0.1 of its potential returns per unit of risk. Vanguard Lifestrategy Moderate is currently generating about 0.11 per unit of risk. If you would invest 18,143 in Vanguard Growth Index on August 30, 2024 and sell it today you would earn a total of 2,742 from holding Vanguard Growth Index or generate 15.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Growth Index vs. Vanguard Lifestrategy Moderate
Performance |
| Timeline |
| Vanguard Growth Index |
| Vanguard Lifestrategy |
Vanguard Growth and Vanguard Lifestrategy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Growth and Vanguard Lifestrategy
The main advantage of trading using opposite Vanguard Growth and Vanguard Lifestrategy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Growth position performs unexpectedly, Vanguard Lifestrategy 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 Lifestrategy will offset losses from the drop in Vanguard Lifestrategy'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 |
| Vanguard Lifestrategy vs. Vanguard Wellesley Income | Vanguard Lifestrategy vs. Vanguard Total Bond | Vanguard Lifestrategy vs. Vanguard Growth Index | Vanguard Lifestrategy vs. Vanguard Wellington Fund |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
Other Complementary Tools
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| Content Syndication Quickly integrate customizable finance content to your own investment portal |