Correlation Between Vanguard Specialized and Vanguard Industrials
Can any of the company-specific risk be diversified away by investing in both Vanguard Specialized and Vanguard Industrials 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 Specialized and Vanguard Industrials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Specialized Funds and Vanguard Industrials ETF, you can compare the effects of market volatilities on Vanguard Specialized and Vanguard Industrials 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 Specialized with a short position of Vanguard Industrials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Specialized and Vanguard Industrials.
Diversification Opportunities for Vanguard Specialized and Vanguard Industrials
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vanguard and Vanguard is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Specialized Funds and Vanguard Industrials ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Industrials ETF and Vanguard Specialized 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 Specialized Funds are associated (or correlated) with Vanguard Industrials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Industrials ETF has no effect on the direction of Vanguard Specialized i.e., Vanguard Specialized and Vanguard Industrials go up and down completely randomly.
Pair Corralation between Vanguard Specialized and Vanguard Industrials
Assuming the 90 days trading horizon Vanguard Specialized is expected to generate 1.57 times less return on investment than Vanguard Industrials. But when comparing it to its historical volatility, Vanguard Specialized Funds is 1.11 times less risky than Vanguard Industrials. It trades about 0.22 of its potential returns per unit of risk. Vanguard Industrials ETF is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest 523,015 in Vanguard Industrials ETF on September 1, 2024 and sell it today you would earn a total of 49,052 from holding Vanguard Industrials ETF or generate 9.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Specialized Funds vs. Vanguard Industrials ETF
Performance |
| Timeline |
| Vanguard Specialized |
| Vanguard Industrials ETF |
Vanguard Specialized and Vanguard Industrials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Specialized and Vanguard Industrials
The main advantage of trading using opposite Vanguard Specialized and Vanguard Industrials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Specialized position performs unexpectedly, Vanguard Industrials 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 Industrials will offset losses from the drop in Vanguard Industrials' long position.| Vanguard Specialized vs. Vanguard Funds Public | Vanguard Specialized vs. Vanguard World | Vanguard Specialized vs. Vanguard Index Funds | Vanguard Specialized vs. Vanguard Industrials ETF |
| Vanguard Industrials vs. Vanguard Funds Public | Vanguard Industrials vs. Vanguard Specialized Funds | Vanguard Industrials vs. Vanguard World | Vanguard Industrials vs. Vanguard Index Funds |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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