Correlation Between Vanguard Target and Sp 500
Can any of the company-specific risk be diversified away by investing in both Vanguard Target and Sp 500 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 Target and Sp 500 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Target Retirement and Sp 500 Equal, you can compare the effects of market volatilities on Vanguard Target and Sp 500 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 Target with a short position of Sp 500. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Target and Sp 500.
Diversification Opportunities for Vanguard Target and Sp 500
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vanguard and INDEX is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Target Retirement and Sp 500 Equal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sp 500 Equal and Vanguard Target 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 Target Retirement are associated (or correlated) with Sp 500. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sp 500 Equal has no effect on the direction of Vanguard Target i.e., Vanguard Target and Sp 500 go up and down completely randomly.
Pair Corralation between Vanguard Target and Sp 500
Assuming the 90 days horizon Vanguard Target is expected to generate 2.12 times less return on investment than Sp 500. But when comparing it to its historical volatility, Vanguard Target Retirement is 1.6 times less risky than Sp 500. It trades about 0.1 of its potential returns per unit of risk. Sp 500 Equal is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 4,512 in Sp 500 Equal on August 25, 2024 and sell it today you would earn a total of 1,189 from holding Sp 500 Equal or generate 26.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Target Retirement vs. Sp 500 Equal
Performance |
| Timeline |
| Vanguard Target Reti |
| Sp 500 Equal |
Vanguard Target and Sp 500 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Target and Sp 500
The main advantage of trading using opposite Vanguard Target and Sp 500 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Target position performs unexpectedly, Sp 500 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 Sp 500 will offset losses from the drop in Sp 500's long position.| Vanguard Target vs. Vanguard Target Retirement | Vanguard Target vs. Vanguard Target Retirement | Vanguard Target vs. Vanguard Target Retirement | Vanguard Target vs. Vanguard Target Retirement |
| Sp 500 vs. Fidelity Total Market | Sp 500 vs. Fidelity Extended Market | Sp 500 vs. Fidelity Zero Total | Sp 500 vs. Fidelity Small Cap |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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