Correlation Between Vanguard Total and Stone Ridge
Can any of the company-specific risk be diversified away by investing in both Vanguard Total and Stone Ridge 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 Total and Stone Ridge into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Total Stock and Stone Ridge Diversified, you can compare the effects of market volatilities on Vanguard Total and Stone Ridge 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 Total with a short position of Stone Ridge. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Total and Stone Ridge.
Diversification Opportunities for Vanguard Total and Stone Ridge
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between VANGUARD and Stone is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Stock and Stone Ridge Diversified in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stone Ridge Diversified and Vanguard Total 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 Total Stock are associated (or correlated) with Stone Ridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stone Ridge Diversified has no effect on the direction of Vanguard Total i.e., Vanguard Total and Stone Ridge go up and down completely randomly.
Pair Corralation between Vanguard Total and Stone Ridge
Assuming the 90 days horizon Vanguard Total Stock is expected to generate 3.75 times more return on investment than Stone Ridge. However, Vanguard Total is 3.75 times more volatile than Stone Ridge Diversified. It trades about 0.14 of its potential returns per unit of risk. Stone Ridge Diversified is currently generating about 0.22 per unit of risk. If you would invest 12,596 in Vanguard Total Stock on September 1, 2024 and sell it today you would earn a total of 1,996 from holding Vanguard Total Stock or generate 15.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Total Stock vs. Stone Ridge Diversified
Performance |
| Timeline |
| Vanguard Total Stock |
| Stone Ridge Diversified |
Vanguard Total and Stone Ridge Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Total and Stone Ridge
The main advantage of trading using opposite Vanguard Total and Stone Ridge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Total position performs unexpectedly, Stone Ridge 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 Stone Ridge will offset losses from the drop in Stone Ridge's long position.| Vanguard Total vs. Vanguard Total International | Vanguard Total vs. Vanguard Total Bond | Vanguard Total vs. Vanguard Small Cap Index | Vanguard Total vs. Vanguard Reit Index |
| Stone Ridge vs. Strategic Allocation Aggressive | Stone Ridge vs. Ab High Income | Stone Ridge vs. Western Asset High | Stone Ridge vs. T Rowe Price |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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