Correlation Between Vanguard Market and Vanguard Extended
Can any of the company-specific risk be diversified away by investing in both Vanguard Market 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 Market 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 Market Neutral and Vanguard Extended Market, you can compare the effects of market volatilities on Vanguard Market 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 Market with a short position of Vanguard Extended. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Market and Vanguard Extended.
Diversification Opportunities for Vanguard Market and Vanguard Extended
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Vanguard and Vanguard is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Market Neutral 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 Market 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 Market Neutral 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 Market i.e., Vanguard Market and Vanguard Extended go up and down completely randomly.
Pair Corralation between Vanguard Market and Vanguard Extended
Assuming the 90 days horizon Vanguard Market Neutral is expected to under-perform the Vanguard Extended. But the mutual fund apears to be less risky and, when comparing its historical volatility, Vanguard Market Neutral is 2.88 times less risky than Vanguard Extended. The mutual fund trades about -0.1 of its potential returns per unit of risk. The Vanguard Extended Market is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest 34,752 in Vanguard Extended Market on August 27, 2024 and sell it today you would earn a total of 3,802 from holding Vanguard Extended Market or generate 10.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Market Neutral vs. Vanguard Extended Market
Performance |
| Timeline |
| Vanguard Market Neutral |
| Vanguard Extended Market |
Vanguard Market and Vanguard Extended Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Market and Vanguard Extended
The main advantage of trading using opposite Vanguard Market and Vanguard Extended positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Market 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 Market vs. Vanguard Commodity Strategy | Vanguard Market vs. Vanguard Global Minimum | Vanguard Market vs. Vanguard Strategic Small Cap |
| Vanguard Extended vs. Vanguard Small Cap Index | Vanguard Extended vs. Vanguard 500 Index | Vanguard Extended vs. Vanguard Growth Index | Vanguard Extended vs. Vanguard Total International |
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 Stocks Directory module to find actively traded stocks across global markets.
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