Correlation Between Vanguard Extended and Vanguard Quality
Can any of the company-specific risk be diversified away by investing in both Vanguard Extended and Vanguard Quality 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 Extended and Vanguard Quality into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Extended Market and Vanguard Quality Factor, you can compare the effects of market volatilities on Vanguard Extended and Vanguard Quality 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 Extended with a short position of Vanguard Quality. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Extended and Vanguard Quality.
Diversification Opportunities for Vanguard Extended and Vanguard Quality
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vanguard and Vanguard is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Extended Market and Vanguard Quality Factor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Quality Factor and Vanguard Extended 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 Extended Market are associated (or correlated) with Vanguard Quality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Quality Factor has no effect on the direction of Vanguard Extended i.e., Vanguard Extended and Vanguard Quality go up and down completely randomly.
Pair Corralation between Vanguard Extended and Vanguard Quality
Considering the 90-day investment horizon Vanguard Extended Market is expected to generate 1.29 times more return on investment than Vanguard Quality. However, Vanguard Extended is 1.29 times more volatile than Vanguard Quality Factor. It trades about 0.33 of its potential returns per unit of risk. Vanguard Quality Factor is currently generating about 0.21 per unit of risk. If you would invest 18,567 in Vanguard Extended Market on August 29, 2024 and sell it today you would earn a total of 1,905 from holding Vanguard Extended Market or generate 10.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Extended Market vs. Vanguard Quality Factor
Performance |
| Timeline |
| Vanguard Extended Market |
| Vanguard Quality Factor |
Vanguard Extended and Vanguard Quality Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Extended and Vanguard Quality
The main advantage of trading using opposite Vanguard Extended and Vanguard Quality positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Extended position performs unexpectedly, Vanguard Quality 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 Quality will offset losses from the drop in Vanguard Quality's long position.| Vanguard Extended vs. Vanguard Large Cap Index | Vanguard Extended vs. Vanguard Small Cap Growth | Vanguard Extended vs. Vanguard Mid Cap Index | Vanguard Extended vs. Vanguard Mid Cap Growth |
| Vanguard Quality vs. Vanguard Mid Cap Index | Vanguard Quality vs. iShares Core SP | Vanguard Quality vs. SPDR SP MIDCAP | Vanguard Quality vs. Vanguard SP Mid Cap |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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