Correlation Between Vanguard and Vanguard World
Can any of the company-specific risk be diversified away by investing in both Vanguard and Vanguard World 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 and Vanguard World into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard SP 500 and Vanguard World, you can compare the effects of market volatilities on Vanguard and Vanguard World 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 with a short position of Vanguard World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard and Vanguard World.
Diversification Opportunities for Vanguard and Vanguard World
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Vanguard and Vanguard is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard SP 500 and Vanguard World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard World and Vanguard 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 SP 500 are associated (or correlated) with Vanguard World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard World has no effect on the direction of Vanguard i.e., Vanguard and Vanguard World go up and down completely randomly.
Pair Corralation between Vanguard and Vanguard World
Assuming the 90 days trading horizon Vanguard SP 500 is expected to generate 0.89 times more return on investment than Vanguard World. However, Vanguard SP 500 is 1.12 times less risky than Vanguard World. It trades about 0.14 of its potential returns per unit of risk. Vanguard World is currently generating about 0.11 per unit of risk. If you would invest 998,666 in Vanguard SP 500 on November 2, 2024 and sell it today you would earn a total of 151,334 from holding Vanguard SP 500 or generate 15.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard SP 500 vs. Vanguard World
Performance |
| Timeline |
| Vanguard SP 500 |
| Vanguard World |
Vanguard and Vanguard World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard and Vanguard World
The main advantage of trading using opposite Vanguard and Vanguard World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard position performs unexpectedly, Vanguard World 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 World will offset losses from the drop in Vanguard World's long position.| Vanguard vs. Vanguard Funds Public | Vanguard vs. Vanguard Specialized Funds | Vanguard vs. Vanguard World | Vanguard vs. Vanguard Index Funds |
| Vanguard World vs. Vanguard Funds Public | Vanguard World vs. Vanguard Specialized Funds | Vanguard World vs. Vanguard World | Vanguard World 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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