Correlation Between Vanguard and Vanguard Total
Can any of the company-specific risk be diversified away by investing in both Vanguard and Vanguard Total 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 and Vanguard Total into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard SP 500 and Vanguard Total Market, you can compare the effects of market volatilities on Vanguard and Vanguard Total 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 with a short position of Vanguard Total. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard and Vanguard Total.
Diversification Opportunities for Vanguard and Vanguard Total
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vanguard and Vanguard is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard SP 500 and Vanguard Total Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Total Market and Vanguard 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 SP 500 are associated (or correlated) with Vanguard Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Total Market has no effect on the direction of Vanguard i.e., Vanguard and Vanguard Total go up and down completely randomly.
Pair Corralation between Vanguard and Vanguard Total
Assuming the 90 days trading horizon Vanguard is expected to generate 1.84 times less return on investment than Vanguard Total. But when comparing it to its historical volatility, Vanguard SP 500 is 1.18 times less risky than Vanguard Total. It trades about 0.14 of its potential returns per unit of risk. Vanguard Total Market is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 10,758 in Vanguard Total Market on August 25, 2024 and sell it today you would earn a total of 518.00 from holding Vanguard Total Market or generate 4.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
Vanguard SP 500 vs. Vanguard Total Market
Performance |
| Timeline |
| Vanguard SP 500 |
| Vanguard Total Market |
Vanguard and Vanguard Total Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard and Vanguard Total
The main advantage of trading using opposite Vanguard and Vanguard Total positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard position performs unexpectedly, Vanguard Total 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 Total will offset losses from the drop in Vanguard Total's long position.The idea behind Vanguard SP 500 and Vanguard Total 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.| Vanguard Total vs. Vanguard FTSE Canada | Vanguard Total vs. Vanguard FTSE Emerging | Vanguard Total vs. iShares Core MSCI | Vanguard Total vs. Vanguard Canadian Aggregate |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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