Correlation Between Vanguard Total and Madison Covered
Can any of the company-specific risk be diversified away by investing in both Vanguard Total and Madison Covered 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 Madison Covered into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Total International and Madison Covered Call, you can compare the effects of market volatilities on Vanguard Total and Madison Covered 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 Madison Covered. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Total and Madison Covered.
Diversification Opportunities for Vanguard Total and Madison Covered
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Vanguard and Madison is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total International and Madison Covered Call in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Madison Covered Call 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 International are associated (or correlated) with Madison Covered. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Madison Covered Call has no effect on the direction of Vanguard Total i.e., Vanguard Total and Madison Covered go up and down completely randomly.
Pair Corralation between Vanguard Total and Madison Covered
Assuming the 90 days horizon Vanguard Total International is expected to generate 1.51 times more return on investment than Madison Covered. However, Vanguard Total is 1.51 times more volatile than Madison Covered Call. It trades about 0.02 of its potential returns per unit of risk. Madison Covered Call is currently generating about -0.06 per unit of risk. If you would invest 3,202 in Vanguard Total International on October 25, 2024 and sell it today you would earn a total of 44.00 from holding Vanguard Total International or generate 1.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Total International vs. Madison Covered Call
Performance |
| Timeline |
| Vanguard Total Inter |
| Madison Covered Call |
Vanguard Total and Madison Covered Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Total and Madison Covered
The main advantage of trading using opposite Vanguard Total and Madison Covered positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Total position performs unexpectedly, Madison Covered 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 Madison Covered will offset losses from the drop in Madison Covered's long position.| Vanguard Total vs. Vanguard Total Bond | Vanguard Total vs. Vanguard Total Stock | Vanguard Total vs. Vanguard Total International | Vanguard Total vs. Vanguard Small Cap Index |
| Madison Covered vs. Vanguard Total Stock | Madison Covered vs. Vanguard 500 Index | Madison Covered vs. Vanguard Total Stock | Madison Covered vs. Vanguard Total Stock |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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