Correlation Between Vanguard Value and Vanguard Dividend
Can any of the company-specific risk be diversified away by investing in both Vanguard Value and Vanguard Dividend 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 Value and Vanguard Dividend into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Value Index and Vanguard Dividend Appreciation, you can compare the effects of market volatilities on Vanguard Value and Vanguard Dividend 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 Value with a short position of Vanguard Dividend. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Value and Vanguard Dividend.
Diversification Opportunities for Vanguard Value and Vanguard Dividend
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vanguard and Vanguard is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Value Index and Vanguard Dividend Appreciation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Dividend and Vanguard Value 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 Value Index are associated (or correlated) with Vanguard Dividend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Dividend has no effect on the direction of Vanguard Value i.e., Vanguard Value and Vanguard Dividend go up and down completely randomly.
Pair Corralation between Vanguard Value and Vanguard Dividend
Assuming the 90 days horizon Vanguard Value is expected to generate 1.14 times less return on investment than Vanguard Dividend. In addition to that, Vanguard Value is 1.06 times more volatile than Vanguard Dividend Appreciation. It trades about 0.09 of its total potential returns per unit of risk. Vanguard Dividend Appreciation is currently generating about 0.11 per unit of volatility. If you would invest 3,974 in Vanguard Dividend Appreciation on November 19, 2024 and sell it today you would earn a total of 1,558 from holding Vanguard Dividend Appreciation or generate 39.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Value Index vs. Vanguard Dividend Appreciation
Performance |
| Timeline |
| Vanguard Value Index |
| Vanguard Dividend |
Vanguard Value and Vanguard Dividend Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Value and Vanguard Dividend
The main advantage of trading using opposite Vanguard Value and Vanguard Dividend positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Value position performs unexpectedly, Vanguard Dividend 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 Dividend will offset losses from the drop in Vanguard Dividend's long position.| Vanguard Value vs. Vanguard Small Cap Value | Vanguard Value vs. Vanguard Growth Index | Vanguard Value vs. Vanguard Mid Cap Value | Vanguard Value vs. Vanguard Small Cap Index |
| Vanguard Dividend vs. Vanguard High Dividend | Vanguard Dividend vs. Vanguard Dividend Growth | Vanguard Dividend vs. Vanguard Value Index | Vanguard Dividend vs. Vanguard Growth Index |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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