Correlation Between Vanguard and Litman Gregory
Can any of the company-specific risk be diversified away by investing in both Vanguard and Litman Gregory 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 Litman Gregory 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 Litman Gregory Funds, you can compare the effects of market volatilities on Vanguard and Litman Gregory 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 Litman Gregory. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard and Litman Gregory.
Diversification Opportunities for Vanguard and Litman Gregory
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Vanguard and Litman is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard SP 500 and Litman Gregory Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Litman Gregory Funds 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 Litman Gregory. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Litman Gregory Funds has no effect on the direction of Vanguard i.e., Vanguard and Litman Gregory go up and down completely randomly.
Pair Corralation between Vanguard and Litman Gregory
Considering the 90-day investment horizon Vanguard SP 500 is expected to generate 0.88 times more return on investment than Litman Gregory. However, Vanguard SP 500 is 1.14 times less risky than Litman Gregory. It trades about 0.14 of its potential returns per unit of risk. Litman Gregory Funds is currently generating about 0.02 per unit of risk. If you would invest 48,193 in Vanguard SP 500 on September 1, 2024 and sell it today you would earn a total of 7,152 from holding Vanguard SP 500 or generate 14.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.21% |
| Values | Daily Returns |
Vanguard SP 500 vs. Litman Gregory Funds
Performance |
| Timeline |
| Vanguard SP 500 |
| Litman Gregory Funds |
Vanguard and Litman Gregory Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard and Litman Gregory
The main advantage of trading using opposite Vanguard and Litman Gregory positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard position performs unexpectedly, Litman Gregory 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 Litman Gregory will offset losses from the drop in Litman Gregory's long position.| Vanguard vs. Vanguard Total Stock | Vanguard vs. Vanguard High Dividend | Vanguard vs. Vanguard Information Technology | Vanguard vs. Invesco QQQ Trust |
| Litman Gregory vs. Invesco SP International | Litman Gregory vs. Invesco SP International | Litman Gregory vs. Invesco FTSE RAFI | Litman Gregory vs. Invesco SP Emerging |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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