Correlation Between Vanguard Total and Money Market
Can any of the company-specific risk be diversified away by investing in both Vanguard Total and Money Market 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 Money Market 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 Money Market Obligations, you can compare the effects of market volatilities on Vanguard Total and Money Market 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 Money Market. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Total and Money Market.
Diversification Opportunities for Vanguard Total and Money Market
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vanguard and Money is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Stock and Money Market Obligations in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Money Market Obligations 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 Money Market. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Money Market Obligations has no effect on the direction of Vanguard Total i.e., Vanguard Total and Money Market go up and down completely randomly.
Pair Corralation between Vanguard Total and Money Market
Assuming the 90 days horizon Vanguard Total Stock is expected to generate 6.75 times more return on investment than Money Market. However, Vanguard Total is 6.75 times more volatile than Money Market Obligations. It trades about 0.14 of its potential returns per unit of risk. Money Market Obligations is currently generating about 0.13 per unit of risk. If you would invest 12,595 in Vanguard Total Stock on August 30, 2024 and sell it today you would earn a total of 1,919 from holding Vanguard Total Stock or generate 15.24% 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. Money Market Obligations
Performance |
| Timeline |
| Vanguard Total Stock |
| Money Market Obligations |
Vanguard Total and Money Market Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Total and Money Market
The main advantage of trading using opposite Vanguard Total and Money Market positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Total position performs unexpectedly, Money Market 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 Money Market will offset losses from the drop in Money Market'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 |
| Money Market vs. Vanguard Total Stock | Money Market vs. Vanguard 500 Index | Money Market vs. Vanguard Total Stock | Money Market 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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