Correlation Between Vanguard Mid-cap and Vanguard Diversified
Can any of the company-specific risk be diversified away by investing in both Vanguard Mid-cap and Vanguard Diversified 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-cap and Vanguard Diversified into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Mid Cap Value and Vanguard Diversified Equity, you can compare the effects of market volatilities on Vanguard Mid-cap and Vanguard Diversified 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-cap with a short position of Vanguard Diversified. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Mid-cap and Vanguard Diversified.
Diversification Opportunities for Vanguard Mid-cap and Vanguard Diversified
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vanguard and Vanguard is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Mid Cap Value and Vanguard Diversified Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Diversified and Vanguard Mid-cap 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 Value are associated (or correlated) with Vanguard Diversified. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Diversified has no effect on the direction of Vanguard Mid-cap i.e., Vanguard Mid-cap and Vanguard Diversified go up and down completely randomly.
Pair Corralation between Vanguard Mid-cap and Vanguard Diversified
Assuming the 90 days horizon Vanguard Mid Cap Value is expected to generate 0.82 times more return on investment than Vanguard Diversified. However, Vanguard Mid Cap Value is 1.23 times less risky than Vanguard Diversified. It trades about 0.18 of its potential returns per unit of risk. Vanguard Diversified Equity is currently generating about 0.12 per unit of risk. If you would invest 7,759 in Vanguard Mid Cap Value on August 28, 2024 and sell it today you would earn a total of 1,346 from holding Vanguard Mid Cap Value or generate 17.35% 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 Value vs. Vanguard Diversified Equity
Performance |
| Timeline |
| Vanguard Mid Cap |
| Vanguard Diversified |
Vanguard Mid-cap and Vanguard Diversified Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Mid-cap and Vanguard Diversified
The main advantage of trading using opposite Vanguard Mid-cap and Vanguard Diversified positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Mid-cap position performs unexpectedly, Vanguard Diversified 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 Diversified will offset losses from the drop in Vanguard Diversified's long position.| Vanguard Mid-cap vs. Vanguard Small Cap Value | Vanguard Mid-cap vs. Vanguard Mid Cap Growth | Vanguard Mid-cap vs. Vanguard Value Index | Vanguard Mid-cap vs. Vanguard Small Cap Growth |
| Vanguard Diversified vs. Vanguard Strategic Small Cap | Vanguard Diversified vs. Vanguard Mid Cap | Vanguard Diversified vs. Vanguard Explorer Value | Vanguard Diversified vs. Vanguard Large Cap Index |
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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