Correlation Between Vanguard STAR and Vanguard World
Can any of the company-specific risk be diversified away by investing in both Vanguard STAR and Vanguard World 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 STAR and Vanguard World into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard STAR Funds and Vanguard World, you can compare the effects of market volatilities on Vanguard STAR and Vanguard World 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 STAR with a short position of Vanguard World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard STAR and Vanguard World.
Diversification Opportunities for Vanguard STAR and Vanguard World
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between Vanguard and Vanguard is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard STAR Funds and Vanguard World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard World and Vanguard STAR 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 STAR Funds are associated (or correlated) with Vanguard World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard World has no effect on the direction of Vanguard STAR i.e., Vanguard STAR and Vanguard World go up and down completely randomly.
Pair Corralation between Vanguard STAR and Vanguard World
Assuming the 90 days trading horizon Vanguard STAR Funds is expected to generate 1.29 times more return on investment than Vanguard World. However, Vanguard STAR is 1.29 times more volatile than Vanguard World. It trades about 0.05 of its potential returns per unit of risk. Vanguard World is currently generating about 0.06 per unit of risk. If you would invest 100,038 in Vanguard STAR Funds on September 13, 2024 and sell it today you would earn a total of 25,462 from holding Vanguard STAR Funds or generate 25.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard STAR Funds vs. Vanguard World
Performance |
| Timeline |
| Vanguard STAR Funds |
| Vanguard World |
Vanguard STAR and Vanguard World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard STAR and Vanguard World
The main advantage of trading using opposite Vanguard STAR and Vanguard World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard STAR position performs unexpectedly, Vanguard World 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 World will offset losses from the drop in Vanguard World's long position.| Vanguard STAR vs. Vanguard Funds Public | Vanguard STAR vs. Vanguard Specialized Funds | Vanguard STAR vs. Vanguard World | Vanguard STAR vs. Vanguard Index Funds |
| Vanguard World vs. Vanguard Index Funds | Vanguard World vs. Vanguard Index Funds | Vanguard World vs. Vanguard STAR Funds | Vanguard World vs. SPDR SP 500 |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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