Correlation Between Vanguard Extended and Vanguard California
Can any of the company-specific risk be diversified away by investing in both Vanguard Extended and Vanguard California 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 Extended and Vanguard California into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Extended Market and Vanguard California Long Term, you can compare the effects of market volatilities on Vanguard Extended and Vanguard California 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 Extended with a short position of Vanguard California. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Extended and Vanguard California.
Diversification Opportunities for Vanguard Extended and Vanguard California
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Vanguard and VANGUARD is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Extended Market and Vanguard California Long Term in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard California and Vanguard Extended 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 Extended Market are associated (or correlated) with Vanguard California. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard California has no effect on the direction of Vanguard Extended i.e., Vanguard Extended and Vanguard California go up and down completely randomly.
Pair Corralation between Vanguard Extended and Vanguard California
Assuming the 90 days horizon Vanguard Extended Market is expected to generate 4.22 times more return on investment than Vanguard California. However, Vanguard Extended is 4.22 times more volatile than Vanguard California Long Term. It trades about 0.06 of its potential returns per unit of risk. Vanguard California Long Term is currently generating about 0.05 per unit of risk. If you would invest 17,598 in Vanguard Extended Market on November 4, 2024 and sell it today you would earn a total of 6,714 from holding Vanguard Extended Market or generate 38.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Extended Market vs. Vanguard California Long Term
Performance |
| Timeline |
| Vanguard Extended Market |
| Vanguard California |
Vanguard Extended and Vanguard California Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Extended and Vanguard California
The main advantage of trading using opposite Vanguard Extended and Vanguard California positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Extended position performs unexpectedly, Vanguard California 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 California will offset losses from the drop in Vanguard California's long position.| Vanguard Extended vs. Rational Defensive Growth | Vanguard Extended vs. Vanguard Growth And | Vanguard Extended vs. Qs Growth Fund | Vanguard Extended vs. Versatile Bond Portfolio |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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