Correlation Between Vanguard Extended and Vanguard Large
Can any of the company-specific risk be diversified away by investing in both Vanguard Extended and Vanguard Large 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 Large 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 Large Cap Index, you can compare the effects of market volatilities on Vanguard Extended and Vanguard Large 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 Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Extended and Vanguard Large.
Diversification Opportunities for Vanguard Extended and Vanguard Large
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vanguard and Vanguard is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Extended Market and Vanguard Large Cap Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Large Cap 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 Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Large Cap has no effect on the direction of Vanguard Extended i.e., Vanguard Extended and Vanguard Large go up and down completely randomly.
Pair Corralation between Vanguard Extended and Vanguard Large
Considering the 90-day investment horizon Vanguard Extended Market is expected to generate 1.56 times more return on investment than Vanguard Large. However, Vanguard Extended is 1.56 times more volatile than Vanguard Large Cap Index. It trades about 0.3 of its potential returns per unit of risk. Vanguard Large Cap Index is currently generating about 0.16 per unit of risk. If you would invest 18,330 in Vanguard Extended Market on August 24, 2024 and sell it today you would earn a total of 1,670 from holding Vanguard Extended Market or generate 9.11% 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 Large Cap Index
Performance |
| Timeline |
| Vanguard Extended Market |
| Vanguard Large Cap |
Vanguard Extended and Vanguard Large Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Extended and Vanguard Large
The main advantage of trading using opposite Vanguard Extended and Vanguard Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Extended position performs unexpectedly, Vanguard Large 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 Large will offset losses from the drop in Vanguard Large'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 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 |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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