Correlation Between Vanguard Mid and Common Stock
Can any of the company-specific risk be diversified away by investing in both Vanguard Mid and Common Stock 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 Mid and Common Stock into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Mid Cap Index and Common Stock Fund, you can compare the effects of market volatilities on Vanguard Mid and Common Stock 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 Mid with a short position of Common Stock. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Mid and Common Stock.
Diversification Opportunities for Vanguard Mid and Common Stock
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vanguard and Common is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Mid Cap Index and Common Stock Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Common Stock and Vanguard Mid 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 Mid Cap Index are associated (or correlated) with Common Stock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Common Stock has no effect on the direction of Vanguard Mid i.e., Vanguard Mid and Common Stock go up and down completely randomly.
Pair Corralation between Vanguard Mid and Common Stock
Assuming the 90 days horizon Vanguard Mid Cap Index is expected to generate 0.78 times more return on investment than Common Stock. However, Vanguard Mid Cap Index is 1.29 times less risky than Common Stock. It trades about 0.11 of its potential returns per unit of risk. Common Stock Fund is currently generating about 0.08 per unit of risk. If you would invest 27,987 in Vanguard Mid Cap Index on August 31, 2024 and sell it today you would earn a total of 10,393 from holding Vanguard Mid Cap Index or generate 37.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Mid Cap Index vs. Common Stock Fund
Performance |
| Timeline |
| Vanguard Mid Cap |
| Common Stock |
Vanguard Mid and Common Stock Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Mid and Common Stock
The main advantage of trading using opposite Vanguard Mid and Common Stock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Mid position performs unexpectedly, Common Stock 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 Common Stock will offset losses from the drop in Common Stock's long position.| Vanguard Mid vs. Ambrus Core Bond | Vanguard Mid vs. Calamos Short Term Bond | Vanguard Mid vs. Jpmorgan Short Intermediate Municipal | Vanguard Mid vs. California Bond Fund |
| Common Stock vs. Asg Managed Futures | Common Stock vs. Cref Inflation Linked Bond | Common Stock vs. Western Asset Inflation | Common Stock vs. Nationwide Inflation Protected Securities |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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