Correlation Between Vanguard Large and Overlay Shares
Can any of the company-specific risk be diversified away by investing in both Vanguard Large and Overlay Shares 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 Large and Overlay Shares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Large Cap Index and Overlay Shares Large, you can compare the effects of market volatilities on Vanguard Large and Overlay Shares 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 Large with a short position of Overlay Shares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Large and Overlay Shares.
Diversification Opportunities for Vanguard Large and Overlay Shares
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vanguard and Overlay is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Large Cap Index and Overlay Shares Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Overlay Shares Large and Vanguard Large 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 Large Cap Index are associated (or correlated) with Overlay Shares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Overlay Shares Large has no effect on the direction of Vanguard Large i.e., Vanguard Large and Overlay Shares go up and down completely randomly.
Pair Corralation between Vanguard Large and Overlay Shares
Allowing for the 90-day total investment horizon Vanguard Large is expected to generate 1.01 times less return on investment than Overlay Shares. But when comparing it to its historical volatility, Vanguard Large Cap Index is 1.17 times less risky than Overlay Shares. It trades about 0.18 of its potential returns per unit of risk. Overlay Shares Large is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 4,646 in Overlay Shares Large on August 31, 2024 and sell it today you would earn a total of 170.70 from holding Overlay Shares Large or generate 3.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
Vanguard Large Cap Index vs. Overlay Shares Large
Performance |
| Timeline |
| Vanguard Large Cap |
| Overlay Shares Large |
Vanguard Large and Overlay Shares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Large and Overlay Shares
The main advantage of trading using opposite Vanguard Large and Overlay Shares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Large position performs unexpectedly, Overlay Shares 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 Overlay Shares will offset losses from the drop in Overlay Shares' long position.| Vanguard Large vs. Vanguard Mid Cap Index | Vanguard Large vs. Vanguard Small Cap Index | Vanguard Large vs. Vanguard Extended Market | Vanguard Large vs. Vanguard Small Cap Growth |
| Overlay Shares vs. Vanguard Total Stock | Overlay Shares vs. SPDR SP 500 | Overlay Shares vs. iShares Core SP | Overlay Shares vs. Vanguard Dividend Appreciation |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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