Correlation Between Vanguard Target and One Choice
Can any of the company-specific risk be diversified away by investing in both Vanguard Target and One Choice 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 One Choice 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 One Choice 2045, you can compare the effects of market volatilities on Vanguard Target and One Choice 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 One Choice. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Target and One Choice.
Diversification Opportunities for Vanguard Target and One Choice
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Vanguard and One is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Target Retirement and One Choice 2045 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on One Choice 2045 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 One Choice. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of One Choice 2045 has no effect on the direction of Vanguard Target i.e., Vanguard Target and One Choice go up and down completely randomly.
Pair Corralation between Vanguard Target and One Choice
Assuming the 90 days horizon Vanguard Target is expected to generate 1.13 times less return on investment than One Choice. In addition to that, Vanguard Target is 1.22 times more volatile than One Choice 2045. It trades about 0.27 of its total potential returns per unit of risk. One Choice 2045 is currently generating about 0.38 per unit of volatility. If you would invest 1,822 in One Choice 2045 on September 1, 2024 and sell it today you would earn a total of 62.00 from holding One Choice 2045 or generate 3.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Vanguard Target Retirement vs. One Choice 2045
Performance |
| Timeline |
| Vanguard Target Reti |
| One Choice 2045 |
Vanguard Target and One Choice Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Target and One Choice
The main advantage of trading using opposite Vanguard Target and One Choice positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Target position performs unexpectedly, One Choice 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 One Choice will offset losses from the drop in One Choice'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 |
| One Choice vs. One Choice 2035 | One Choice vs. One Choice 2025 | One Choice vs. One Choice In | One Choice vs. One Choice 2040 |
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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