Correlation Between Morningstar Aggressive and Vanguard Total

Can any of the company-specific risk be diversified away by investing in both Morningstar Aggressive 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 Morningstar Aggressive and Vanguard Total into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Morningstar Aggressive Growth and Vanguard Total Stock, you can compare the effects of market volatilities on Morningstar Aggressive 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 Morningstar Aggressive with a short position of Vanguard Total. Check out your portfolio center. Please also check ongoing floating volatility patterns of Morningstar Aggressive and Vanguard Total.

Diversification Opportunities for Morningstar Aggressive and Vanguard Total

0.89

Correlation Coefficient

Morningstar Aggressive  Vanguard Total

Very poor diversification

The 3 months correlation between Morningstar and Vanguard is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Morningstar Aggressive Growth 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 Morningstar Aggressive 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 Morningstar Aggressive Growth 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 Morningstar Aggressive i.e., Morningstar Aggressive and Vanguard Total go up and down completely randomly.

Pair Corralation between Morningstar Aggressive and Vanguard Total

Assuming the 90 days horizon Morningstar Aggressive Growth is expected to under-perform the Vanguard Total. But the mutual fund apears to be less risky and, when comparing its historical volatility, Morningstar Aggressive Growth is 1.17 times less risky than Vanguard Total. The mutual fund trades about -0.06 of its potential returns per unit of risk. The Vanguard Total Stock is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  14,574  in Vanguard Total Stock on December 2, 2024 and sell it today you would lose (313.00) from holding Vanguard Total Stock or give up 2.15% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Morningstar Aggressive Growth  vs.  Vanguard Total Stock

Morningstar Aggressive

Risk-Adjusted Performance

Very Weak

Over the last 90 days Morningstar Aggressive Growth has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Morningstar Aggressive is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Vanguard Total Stock

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Total Stock has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Vanguard Total is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Morningstar Aggressive and Vanguard Total

The main advantage of trading using opposite Morningstar Aggressive and Vanguard Total positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Morningstar Aggressive 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.

The idea behind Morningstar Aggressive Growth and Vanguard Total Stock pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.