Correlation Between Vanguard Institutional and Vanguard Extended
Can any of the company-specific risk be diversified away by investing in both Vanguard Institutional and Vanguard Extended 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 Institutional and Vanguard Extended into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Institutional Index and Vanguard Extended Market, you can compare the effects of market volatilities on Vanguard Institutional and Vanguard Extended 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 Institutional with a short position of Vanguard Extended. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Institutional and Vanguard Extended.
Diversification Opportunities for Vanguard Institutional and Vanguard Extended
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vanguard and Vanguard is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Institutional Index and Vanguard Extended Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Extended Market and Vanguard Institutional 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 Institutional Index are associated (or correlated) with Vanguard Extended. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Extended Market has no effect on the direction of Vanguard Institutional i.e., Vanguard Institutional and Vanguard Extended go up and down completely randomly.
Pair Corralation between Vanguard Institutional and Vanguard Extended
Assuming the 90 days horizon Vanguard Institutional is expected to generate 1.9 times less return on investment than Vanguard Extended. But when comparing it to its historical volatility, Vanguard Institutional Index is 1.77 times less risky than Vanguard Extended. It trades about 0.37 of its potential returns per unit of risk. Vanguard Extended Market is currently generating about 0.4 of returns per unit of risk over similar time horizon. If you would invest 34,270 in Vanguard Extended Market on September 1, 2024 and sell it today you would earn a total of 4,097 from holding Vanguard Extended Market or generate 11.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Vanguard Institutional Index vs. Vanguard Extended Market
Performance |
| Timeline |
| Vanguard Institutional |
| Vanguard Extended Market |
Vanguard Institutional and Vanguard Extended Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Institutional and Vanguard Extended
The main advantage of trading using opposite Vanguard Institutional and Vanguard Extended positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Institutional position performs unexpectedly, Vanguard Extended 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 Extended will offset losses from the drop in Vanguard Extended's long position.| Vanguard Institutional vs. Vanguard Extended Market | Vanguard Institutional vs. Vanguard Total Bond | Vanguard Institutional vs. Vanguard Total Bond | Vanguard Institutional vs. Vanguard Extended Market |
| Vanguard Extended vs. Angel Oak Financial | Vanguard Extended vs. Mesirow Financial Small | Vanguard Extended vs. Goldman Sachs Financial | Vanguard Extended vs. Financials Ultrasector Profund |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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