Correlation Between Vanguard Total and Vanguard ESG
Can any of the company-specific risk be diversified away by investing in both Vanguard Total and Vanguard ESG 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 Vanguard ESG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Total Corporate and Vanguard ESG Corporate, you can compare the effects of market volatilities on Vanguard Total and Vanguard ESG 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 Vanguard ESG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Total and Vanguard ESG.
Diversification Opportunities for Vanguard Total and Vanguard ESG
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Vanguard and Vanguard is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Corporate and Vanguard ESG Corporate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard ESG Corporate 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 Corporate are associated (or correlated) with Vanguard ESG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard ESG Corporate has no effect on the direction of Vanguard Total i.e., Vanguard Total and Vanguard ESG go up and down completely randomly.
Pair Corralation between Vanguard Total and Vanguard ESG
Considering the 90-day investment horizon Vanguard Total is expected to generate 1.01 times less return on investment than Vanguard ESG. In addition to that, Vanguard Total is 1.04 times more volatile than Vanguard ESG Corporate. It trades about 0.04 of its total potential returns per unit of risk. Vanguard ESG Corporate is currently generating about 0.04 per unit of volatility. If you would invest 5,734 in Vanguard ESG Corporate on August 26, 2024 and sell it today you would earn a total of 539.00 from holding Vanguard ESG Corporate or generate 9.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Total Corporate vs. Vanguard ESG Corporate
Performance |
| Timeline |
| Vanguard Total Corporate |
| Vanguard ESG Corporate |
Vanguard Total and Vanguard ESG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Total and Vanguard ESG
The main advantage of trading using opposite Vanguard Total and Vanguard ESG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Total position performs unexpectedly, Vanguard ESG 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 ESG will offset losses from the drop in Vanguard ESG's long position.| Vanguard Total vs. Vanguard Total World | Vanguard Total vs. Vanguard Long Term Corporate | Vanguard Total vs. Vanguard Emerging Markets | Vanguard Total vs. Vanguard Mortgage Backed Securities |
| Vanguard ESG vs. Vanguard ESG International | Vanguard ESG vs. Vanguard ESG Stock | Vanguard ESG vs. Vanguard Total Corporate | Vanguard ESG vs. Vanguard Ultra Short Bond |
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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