Correlation Between Vanguard Total and SWP Growth

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

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

Diversification Opportunities for Vanguard Total and SWP Growth

0.61

Correlation Coefficient

Vanguard Total  SWP Growth

Poor diversification

The 3 months correlation between Vanguard and SWP is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Bond and SWP Growth Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SWP Growth Income and Vanguard Total 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 Total Bond are associated (or correlated) with SWP Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SWP Growth Income has no effect on the direction of Vanguard Total i.e., Vanguard Total and SWP Growth go up and down completely randomly.

Pair Corralation between Vanguard Total and SWP Growth

Considering the 90-day investment horizon Vanguard Total is expected to generate 1.79 times less return on investment than SWP Growth. But when comparing it to its historical volatility, Vanguard Total Bond is 1.9 times less risky than SWP Growth. It trades about 0.07 of its potential returns per unit of risk. SWP Growth Income is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2,486  in SWP Growth Income on December 2, 2024 and sell it today you would earn a total of  115.00  from holding SWP Growth Income or generate 4.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	29.19%
Values	Daily Returns

Vanguard Total Bond  vs.  SWP Growth Income

Vanguard Total Bond

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Total Bond are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Vanguard Total is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

SWP Growth Income

Risk-Adjusted Performance

Very Weak

Over the last 90 days SWP Growth Income has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, SWP Growth is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Vanguard Total and SWP Growth

The main advantage of trading using opposite Vanguard Total and SWP Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Total position performs unexpectedly, SWP Growth 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 SWP Growth will offset losses from the drop in SWP Growth's long position.

The idea behind Vanguard Total Bond and SWP Growth Income 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..