Correlation Between Vanguard Wellesley and Vanguard Lifestrategy
Can any of the company-specific risk be diversified away by investing in both Vanguard Wellesley and Vanguard Lifestrategy 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 Wellesley and Vanguard Lifestrategy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Wellesley Income and Vanguard Lifestrategy Moderate, you can compare the effects of market volatilities on Vanguard Wellesley and Vanguard Lifestrategy 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 Wellesley with a short position of Vanguard Lifestrategy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Wellesley and Vanguard Lifestrategy.
Diversification Opportunities for Vanguard Wellesley and Vanguard Lifestrategy
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vanguard and Vanguard is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Wellesley Income and Vanguard Lifestrategy Moderate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Lifestrategy and Vanguard Wellesley 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 Wellesley Income are associated (or correlated) with Vanguard Lifestrategy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Lifestrategy has no effect on the direction of Vanguard Wellesley i.e., Vanguard Wellesley and Vanguard Lifestrategy go up and down completely randomly.
Pair Corralation between Vanguard Wellesley and Vanguard Lifestrategy
Assuming the 90 days horizon Vanguard Wellesley is expected to generate 1.1 times less return on investment than Vanguard Lifestrategy. But when comparing it to its historical volatility, Vanguard Wellesley Income is 1.53 times less risky than Vanguard Lifestrategy. It trades about 0.16 of its potential returns per unit of risk. Vanguard Lifestrategy Moderate is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 3,155 in Vanguard Lifestrategy Moderate on August 30, 2024 and sell it today you would earn a total of 224.00 from holding Vanguard Lifestrategy Moderate or generate 7.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Wellesley Income vs. Vanguard Lifestrategy Moderate
Performance |
| Timeline |
| Vanguard Wellesley Income |
| Vanguard Lifestrategy |
Vanguard Wellesley and Vanguard Lifestrategy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Wellesley and Vanguard Lifestrategy
The main advantage of trading using opposite Vanguard Wellesley and Vanguard Lifestrategy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Wellesley position performs unexpectedly, Vanguard Lifestrategy 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 Lifestrategy will offset losses from the drop in Vanguard Lifestrategy's long position.| Vanguard Wellesley vs. Vanguard Wellington Fund | Vanguard Wellesley vs. Vanguard Balanced Index | Vanguard Wellesley vs. Vanguard Wellesley Income | Vanguard Wellesley vs. Vanguard Dividend Growth |
| Vanguard Lifestrategy vs. Vanguard Wellesley Income | Vanguard Lifestrategy vs. Vanguard Total Bond | Vanguard Lifestrategy vs. Vanguard Growth Index | Vanguard Lifestrategy vs. Vanguard Wellington 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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