Correlation Between Vanguard STAR and Select Sector
Can any of the company-specific risk be diversified away by investing in both Vanguard STAR and Select Sector 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 Select Sector 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 The Select Sector, you can compare the effects of market volatilities on Vanguard STAR and Select Sector 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 Select Sector. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard STAR and Select Sector.
Diversification Opportunities for Vanguard STAR and Select Sector
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between Vanguard and Select is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard STAR Funds and The Select Sector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Select Sector 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 Select Sector. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Select Sector has no effect on the direction of Vanguard STAR i.e., Vanguard STAR and Select Sector go up and down completely randomly.
Pair Corralation between Vanguard STAR and Select Sector
Assuming the 90 days trading horizon Vanguard STAR Funds is expected to generate 3.34 times more return on investment than Select Sector. However, Vanguard STAR is 3.34 times more volatile than The Select Sector. It trades about 0.02 of its potential returns per unit of risk. The Select Sector is currently generating about -0.22 per unit of risk. If you would invest 126,100 in Vanguard STAR Funds on December 11, 2024 and sell it today you would earn a total of 400.00 from holding Vanguard STAR Funds or generate 0.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard STAR Funds vs. The Select Sector
Performance |
| Timeline |
| Vanguard STAR Funds |
| Select Sector |
Vanguard STAR and Select Sector Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard STAR and Select Sector
The main advantage of trading using opposite Vanguard STAR and Select Sector positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard STAR position performs unexpectedly, Select Sector 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 Select Sector will offset losses from the drop in Select Sector'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 |
| Select Sector vs. The Select Sector | Select Sector vs. The Select Sector | Select Sector vs. The Select Sector | Select Sector vs. The Select Sector |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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