Correlation Between Vanguard Total and Vanguard Target

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Can any of the company-specific risk be diversified away by investing in both Vanguard Total and Vanguard Target 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 Vanguard Target 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 Vanguard Target Retirement, you can compare the effects of market volatilities on Vanguard Total and Vanguard Target 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 Vanguard Target. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Total and Vanguard Target.

Diversification Opportunities for Vanguard Total and Vanguard Target

0.7
  Correlation Coefficient

Poor diversification

The 3 months correlation between Vanguard and Vanguard is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Stock and Vanguard Target Retirement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Target Reti 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 Vanguard Target. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Target Reti has no effect on the direction of Vanguard Total i.e., Vanguard Total and Vanguard Target go up and down completely randomly.

Pair Corralation between Vanguard Total and Vanguard Target

Assuming the 90 days horizon Vanguard Total Stock is expected to generate 2.05 times more return on investment than Vanguard Target. However, Vanguard Total is 2.05 times more volatile than Vanguard Target Retirement. It trades about 0.22 of its potential returns per unit of risk. Vanguard Target Retirement is currently generating about 0.11 per unit of risk. If you would invest  13,948  in Vanguard Total Stock on August 29, 2024 and sell it today you would earn a total of  611.00  from holding Vanguard Total Stock or generate 4.38% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Vanguard Total Stock  vs.  Vanguard Target Retirement

 Performance 
       Timeline  
Vanguard Total Stock 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Total Stock are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak primary indicators, Vanguard Total may actually be approaching a critical reversion point that can send shares even higher in December 2024.
Vanguard Target Reti 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Target Retirement are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Vanguard Target is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Vanguard Total and Vanguard Target Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Vanguard Total and Vanguard Target

The main advantage of trading using opposite Vanguard Total and Vanguard Target positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Total position performs unexpectedly, Vanguard Target 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 Vanguard Target will offset losses from the drop in Vanguard Target's long position.
The idea behind Vanguard Total Stock and Vanguard Target Retirement pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.

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