Correlation Between Vanguard Pennsylvania and Vanguard Extended
Can any of the company-specific risk be diversified away by investing in both Vanguard Pennsylvania 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 Pennsylvania 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 Pennsylvania Long Term and Vanguard Extended Market, you can compare the effects of market volatilities on Vanguard Pennsylvania 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 Pennsylvania with a short position of Vanguard Extended. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Pennsylvania and Vanguard Extended.
Diversification Opportunities for Vanguard Pennsylvania and Vanguard Extended
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vanguard and Vanguard is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Pennsylvania Long Ter 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 Pennsylvania 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 Pennsylvania Long Term 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 Pennsylvania i.e., Vanguard Pennsylvania and Vanguard Extended go up and down completely randomly.
Pair Corralation between Vanguard Pennsylvania and Vanguard Extended
Assuming the 90 days horizon Vanguard Pennsylvania Long Term is expected to under-perform the Vanguard Extended. But the mutual fund apears to be less risky and, when comparing its historical volatility, Vanguard Pennsylvania Long Term is 4.2 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 0.05 of returns per unit of risk over similar time horizon. If you would invest 14,672 in Vanguard Extended Market on October 19, 2024 and sell it today you would earn a total of 310.00 from holding Vanguard Extended Market or generate 2.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Pennsylvania Long Ter vs. Vanguard Extended Market
Performance |
| Timeline |
| Vanguard Pennsylvania |
| Vanguard Extended Market |
Vanguard Pennsylvania and Vanguard Extended Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Pennsylvania and Vanguard Extended
The main advantage of trading using opposite Vanguard Pennsylvania and Vanguard Extended positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Pennsylvania 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.The idea behind Vanguard Pennsylvania Long Term and Vanguard Extended Market pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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