Correlation Between Value Fund and Vanguard Total
Can any of the company-specific risk be diversified away by investing in both Value Fund and Vanguard Total 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 Value Fund and Vanguard Total into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Value Fund Value and Vanguard Total Stock, you can compare the effects of market volatilities on Value Fund and Vanguard Total 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 Value Fund with a short position of Vanguard Total. Check out your portfolio center. Please also check ongoing floating volatility patterns of Value Fund and Vanguard Total.
Diversification Opportunities for Value Fund and Vanguard Total
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Value and Vanguard is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Value Fund Value and Vanguard Total Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Total Stock and Value Fund 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 Value Fund Value are associated (or correlated) with Vanguard Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Total Stock has no effect on the direction of Value Fund i.e., Value Fund and Vanguard Total go up and down completely randomly.
Pair Corralation between Value Fund and Vanguard Total
Assuming the 90 days horizon Value Fund is expected to generate 1.5 times less return on investment than Vanguard Total. But when comparing it to its historical volatility, Value Fund Value is 1.0 times less risky than Vanguard Total. It trades about 0.08 of its potential returns per unit of risk. Vanguard Total Stock is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 12,142 in Vanguard Total Stock on September 1, 2024 and sell it today you would earn a total of 2,447 from holding Vanguard Total Stock or generate 20.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.47% |
| Values | Daily Returns |
Value Fund Value vs. Vanguard Total Stock
Performance |
| Timeline |
| Value Fund Value |
| Vanguard Total Stock |
Value Fund and Vanguard Total Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Value Fund and Vanguard Total
The main advantage of trading using opposite Value Fund and Vanguard Total positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Value Fund position performs unexpectedly, Vanguard Total 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 Total will offset losses from the drop in Vanguard Total's long position.| Value Fund vs. Partners Value Fund | Value Fund vs. Clipper Fund Inc | Value Fund vs. Longleaf Partners Fund | Value Fund vs. Third Avenue Value |
| Vanguard Total vs. Vanguard Total International | Vanguard Total vs. Vanguard Total Bond | Vanguard Total vs. Vanguard 500 Index | Vanguard Total vs. Vanguard Reit Index |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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