Correlation Between Vanguard Materials and Vanguard Target
Can any of the company-specific risk be diversified away by investing in both Vanguard Materials and Vanguard Target 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 Materials and Vanguard Target into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Materials Index and Vanguard Target Retirement, you can compare the effects of market volatilities on Vanguard Materials and Vanguard Target 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 Materials with a short position of Vanguard Target. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Materials and Vanguard Target.
Diversification Opportunities for Vanguard Materials and Vanguard Target
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vanguard and Vanguard is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Materials Index and Vanguard Target Retirement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Target Reti and Vanguard Materials 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 Materials Index are associated (or correlated) with Vanguard Target. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Target Reti has no effect on the direction of Vanguard Materials i.e., Vanguard Materials and Vanguard Target go up and down completely randomly.
Pair Corralation between Vanguard Materials and Vanguard Target
Assuming the 90 days horizon Vanguard Materials Index is expected to generate 1.62 times more return on investment than Vanguard Target. However, Vanguard Materials is 1.62 times more volatile than Vanguard Target Retirement. It trades about 0.07 of its potential returns per unit of risk. Vanguard Target Retirement is currently generating about 0.1 per unit of risk. If you would invest 8,721 in Vanguard Materials Index on August 31, 2024 and sell it today you would earn a total of 2,093 from holding Vanguard Materials Index or generate 24.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.73% |
| Values | Daily Returns |
Vanguard Materials Index vs. Vanguard Target Retirement
Performance |
| Timeline |
| Vanguard Materials Index |
| Vanguard Target Reti |
Vanguard Materials and Vanguard Target Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Materials and Vanguard Target
The main advantage of trading using opposite Vanguard Materials and Vanguard Target positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Materials position performs unexpectedly, Vanguard Target 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 Target will offset losses from the drop in Vanguard Target's long position.| Vanguard Materials vs. Vanguard Emerging Markets | Vanguard Materials vs. Vanguard Total International | Vanguard Materials vs. Vanguard Reit Index | Vanguard Materials vs. Vanguard Industrials Index |
| Vanguard Target vs. Artisan High Income | Vanguard Target vs. Ab Global Risk | Vanguard Target vs. Morningstar Aggressive Growth | Vanguard Target vs. Pace High Yield |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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