Correlation Between Vanguard Total and Large Cap
Can any of the company-specific risk be diversified away by investing in both Vanguard Total and Large Cap 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 Large Cap 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 Large Cap Fund, you can compare the effects of market volatilities on Vanguard Total and Large Cap 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 Large Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Total and Large Cap.
Diversification Opportunities for Vanguard Total and Large Cap
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vanguard and Large is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Stock and Large Cap Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Large Cap Fund 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 Large Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Large Cap Fund has no effect on the direction of Vanguard Total i.e., Vanguard Total and Large Cap go up and down completely randomly.
Pair Corralation between Vanguard Total and Large Cap
Assuming the 90 days horizon Vanguard Total Stock is expected to generate 0.68 times more return on investment than Large Cap. However, Vanguard Total Stock is 1.48 times less risky than Large Cap. It trades about 0.11 of its potential returns per unit of risk. Large Cap Fund is currently generating about 0.02 per unit of risk. If you would invest 9,359 in Vanguard Total Stock on August 29, 2024 and sell it today you would earn a total of 5,155 from holding Vanguard Total Stock or generate 55.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Total Stock vs. Large Cap Fund
Performance |
| Timeline |
| Vanguard Total Stock |
| Large Cap Fund |
Vanguard Total and Large Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Total and Large Cap
The main advantage of trading using opposite Vanguard Total and Large Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Total position performs unexpectedly, Large Cap 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 Large Cap will offset losses from the drop in Large Cap's long position.| Vanguard Total vs. Vanguard Total International | Vanguard Total vs. Vanguard Total Bond | Vanguard Total vs. Vanguard 500 Index | Vanguard Total vs. Vanguard Reit Index |
| Large Cap vs. Vanguard Total Stock | Large Cap vs. Vanguard 500 Index | Large Cap vs. Vanguard Total Stock | Large Cap 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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