Correlation Between Vanguard Total and Pacer Financial
Can any of the company-specific risk be diversified away by investing in both Vanguard Total and Pacer Financial 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 Pacer Financial 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 Pacer Financial, you can compare the effects of market volatilities on Vanguard Total and Pacer Financial 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 Pacer Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Total and Pacer Financial.
Diversification Opportunities for Vanguard Total and Pacer Financial
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Vanguard and Pacer is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Stock and Pacer Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacer Financial 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 Pacer Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacer Financial has no effect on the direction of Vanguard Total i.e., Vanguard Total and Pacer Financial go up and down completely randomly.
Pair Corralation between Vanguard Total and Pacer Financial
Considering the 90-day investment horizon Vanguard Total Stock is expected to generate 1.04 times more return on investment than Pacer Financial. However, Vanguard Total is 1.04 times more volatile than Pacer Financial. It trades about 0.11 of its potential returns per unit of risk. Pacer Financial is currently generating about 0.11 per unit of risk. If you would invest 19,350 in Vanguard Total Stock on September 2, 2024 and sell it today you would earn a total of 10,636 from holding Vanguard Total Stock or generate 54.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 30.85% |
| Values | Daily Returns |
Vanguard Total Stock vs. Pacer Financial
Performance |
| Timeline |
| Vanguard Total Stock |
| Pacer Financial |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Vanguard Total and Pacer Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Total and Pacer Financial
The main advantage of trading using opposite Vanguard Total and Pacer Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Total position performs unexpectedly, Pacer Financial 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 Pacer Financial will offset losses from the drop in Pacer Financial's long position.| Vanguard Total vs. Vanguard SP 500 | Vanguard Total vs. Vanguard Total International | Vanguard Total vs. Vanguard Real Estate | Vanguard Total vs. Vanguard Total Bond |
| Pacer Financial vs. Vanguard Total Stock | Pacer Financial vs. SPDR SP 500 | Pacer Financial vs. iShares Core SP | Pacer Financial vs. Vanguard Dividend Appreciation |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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