Correlation Between Vanguard Total and Third Avenue
Can any of the company-specific risk be diversified away by investing in both Vanguard Total and Third Avenue 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 Total and Third Avenue into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Total Stock and Third Avenue Real, you can compare the effects of market volatilities on Vanguard Total and Third Avenue 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 Total with a short position of Third Avenue. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Total and Third Avenue.
Diversification Opportunities for Vanguard Total and Third Avenue
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Vanguard and Third is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Stock and Third Avenue Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Third Avenue Real and Vanguard Total 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 Total Stock are associated (or correlated) with Third Avenue. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Third Avenue Real has no effect on the direction of Vanguard Total i.e., Vanguard Total and Third Avenue go up and down completely randomly.
Pair Corralation between Vanguard Total and Third Avenue
Assuming the 90 days horizon Vanguard Total is expected to generate 2.02 times less return on investment than Third Avenue. But when comparing it to its historical volatility, Vanguard Total Stock is 1.35 times less risky than Third Avenue. It trades about 0.2 of its potential returns per unit of risk. Third Avenue Real is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 2,427 in Third Avenue Real on August 29, 2024 and sell it today you would earn a total of 202.00 from holding Third Avenue Real or generate 8.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Total Stock vs. Third Avenue Real
Performance |
| Timeline |
| Vanguard Total Stock |
| Third Avenue Real |
Vanguard Total and Third Avenue Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Total and Third Avenue
The main advantage of trading using opposite Vanguard Total and Third Avenue positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Total position performs unexpectedly, Third Avenue 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 Third Avenue will offset losses from the drop in Third Avenue's long position.| Vanguard Total vs. California Bond Fund | Vanguard Total vs. Icon Bond Fund | Vanguard Total vs. Dreyfusstandish Global Fixed | Vanguard Total vs. Ab Global Bond |
| Third Avenue vs. HUMANA INC | Third Avenue vs. Aquagold International | Third Avenue vs. Barloworld Ltd ADR | Third Avenue vs. Morningstar Unconstrained Allocation |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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