Correlation Between Vanguard Wellington and The Arbitrage
Can any of the company-specific risk be diversified away by investing in both Vanguard Wellington and The Arbitrage 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 Wellington and The Arbitrage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Wellington Fund and The Arbitrage Credit, you can compare the effects of market volatilities on Vanguard Wellington and The Arbitrage 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 Wellington with a short position of The Arbitrage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Wellington and The Arbitrage.
Diversification Opportunities for Vanguard Wellington and The Arbitrage
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vanguard and THE is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Wellington Fund and The Arbitrage Credit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arbitrage Credit and Vanguard Wellington 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 Wellington Fund are associated (or correlated) with The Arbitrage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arbitrage Credit has no effect on the direction of Vanguard Wellington i.e., Vanguard Wellington and The Arbitrage go up and down completely randomly.
Pair Corralation between Vanguard Wellington and The Arbitrage
Assuming the 90 days horizon Vanguard Wellington Fund is expected to generate 4.93 times more return on investment than The Arbitrage. However, Vanguard Wellington is 4.93 times more volatile than The Arbitrage Credit. It trades about 0.12 of its potential returns per unit of risk. The Arbitrage Credit is currently generating about 0.19 per unit of risk. If you would invest 7,222 in Vanguard Wellington Fund on August 25, 2024 and sell it today you would earn a total of 889.00 from holding Vanguard Wellington Fund or generate 12.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Wellington Fund vs. The Arbitrage Credit
Performance |
| Timeline |
| Vanguard Wellington |
| Arbitrage Credit |
Vanguard Wellington and The Arbitrage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Wellington and The Arbitrage
The main advantage of trading using opposite Vanguard Wellington and The Arbitrage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Wellington position performs unexpectedly, The Arbitrage 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 The Arbitrage will offset losses from the drop in The Arbitrage's long position.| Vanguard Wellington vs. Vanguard Wellesley Income | Vanguard Wellington vs. Vanguard Primecap Fund | Vanguard Wellington vs. Vanguard Health Care | Vanguard Wellington vs. Vanguard Windsor Ii |
| The Arbitrage vs. The Arbitrage Fund | The Arbitrage vs. The Arbitrage Fund | The Arbitrage vs. The Arbitrage Fund | The Arbitrage vs. The Arbitrage Fund |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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