Correlation Between Vanguard Utilities and Utilities Select
Can any of the company-specific risk be diversified away by investing in both Vanguard Utilities and Utilities Select 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 Utilities and Utilities Select into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Utilities Index and Utilities Select Sector, you can compare the effects of market volatilities on Vanguard Utilities and Utilities Select 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 Utilities with a short position of Utilities Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Utilities and Utilities Select.
Diversification Opportunities for Vanguard Utilities and Utilities Select
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Vanguard and Utilities is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Utilities Index and Utilities Select Sector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Utilities Select Sector and Vanguard Utilities 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 Utilities Index are associated (or correlated) with Utilities Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Utilities Select Sector has no effect on the direction of Vanguard Utilities i.e., Vanguard Utilities and Utilities Select go up and down completely randomly.
Pair Corralation between Vanguard Utilities and Utilities Select
Considering the 90-day investment horizon Vanguard Utilities is expected to generate 1.03 times less return on investment than Utilities Select. But when comparing it to its historical volatility, Vanguard Utilities Index is 1.01 times less risky than Utilities Select. It trades about 0.04 of its potential returns per unit of risk. Utilities Select Sector is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 6,666 in Utilities Select Sector on August 27, 2024 and sell it today you would earn a total of 1,479 from holding Utilities Select Sector or generate 22.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Utilities Index vs. Utilities Select Sector
Performance |
| Timeline |
| Vanguard Utilities Index |
| Utilities Select Sector |
Vanguard Utilities and Utilities Select Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Utilities and Utilities Select
The main advantage of trading using opposite Vanguard Utilities and Utilities Select positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Utilities position performs unexpectedly, Utilities Select 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 Utilities Select will offset losses from the drop in Utilities Select's long position.| Vanguard Utilities vs. Vanguard Consumer Staples | Vanguard Utilities vs. Vanguard Materials Index | Vanguard Utilities vs. Vanguard Communication Services | Vanguard Utilities vs. Vanguard Financials Index |
| Utilities Select vs. Consumer Staples Select | Utilities Select vs. Industrial Select Sector | Utilities Select vs. Materials Select Sector | Utilities Select vs. Health Care Select |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
Other Complementary Tools
| My Watchlist Analysis Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like | |
| Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas |