Correlation Between Vanguard Lifestrategy and Balanced Strategy
Can any of the company-specific risk be diversified away by investing in both Vanguard Lifestrategy and Balanced Strategy 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 Lifestrategy and Balanced Strategy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Lifestrategy Moderate and Balanced Strategy Fund, you can compare the effects of market volatilities on Vanguard Lifestrategy and Balanced Strategy 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 Lifestrategy with a short position of Balanced Strategy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Lifestrategy and Balanced Strategy.
Diversification Opportunities for Vanguard Lifestrategy and Balanced Strategy
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between VANGUARD and Balanced is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Lifestrategy Moderate and Balanced Strategy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Balanced Strategy and Vanguard Lifestrategy 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 Lifestrategy Moderate are associated (or correlated) with Balanced Strategy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Balanced Strategy has no effect on the direction of Vanguard Lifestrategy i.e., Vanguard Lifestrategy and Balanced Strategy go up and down completely randomly.
Pair Corralation between Vanguard Lifestrategy and Balanced Strategy
Assuming the 90 days horizon Vanguard Lifestrategy is expected to generate 1.42 times less return on investment than Balanced Strategy. In addition to that, Vanguard Lifestrategy is 1.1 times more volatile than Balanced Strategy Fund. It trades about 0.05 of its total potential returns per unit of risk. Balanced Strategy Fund is currently generating about 0.08 per unit of volatility. If you would invest 941.00 in Balanced Strategy Fund on October 25, 2024 and sell it today you would earn a total of 101.00 from holding Balanced Strategy Fund or generate 10.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Lifestrategy Moderate vs. Balanced Strategy Fund
Performance |
| Timeline |
| Vanguard Lifestrategy |
| Balanced Strategy |
Vanguard Lifestrategy and Balanced Strategy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Lifestrategy and Balanced Strategy
The main advantage of trading using opposite Vanguard Lifestrategy and Balanced Strategy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Lifestrategy position performs unexpectedly, Balanced Strategy 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 Balanced Strategy will offset losses from the drop in Balanced Strategy's long position.The idea behind Vanguard Lifestrategy Moderate and Balanced Strategy Fund 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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