Correlation Between Large Cap and Vanguard Total

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

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

Diversification Opportunities for Large Cap and Vanguard Total

0.89

Correlation Coefficient

Large Cap  Vanguard Total

Very poor diversification

The 3 months correlation between Large and Vanguard is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Large Cap International and Vanguard Total International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Total Inter and Large Cap 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 Large Cap International 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 Inter has no effect on the direction of Large Cap i.e., Large Cap and Vanguard Total go up and down completely randomly.

Pair Corralation between Large Cap and Vanguard Total

Assuming the 90 days horizon Large Cap International is expected to generate 0.98 times more return on investment than Vanguard Total. However, Large Cap International is 1.02 times less risky than Vanguard Total. It trades about 0.21 of its potential returns per unit of risk. Vanguard Total International is currently generating about 0.17 per unit of risk. If you would invest  2,673  in Large Cap International on December 21, 2024 and sell it today you would earn a total of  274.00  from holding Large Cap International or generate 10.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.33%
Values	Daily Returns

Large Cap International  vs.  Vanguard Total International

Large Cap International

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Large Cap International are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak essential indicators, Large Cap may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Vanguard Total Inter

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Total International are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Vanguard Total may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Large Cap and Vanguard Total

The main advantage of trading using opposite Large Cap and Vanguard Total positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Large Cap 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 Large Cap International and Vanguard Total International 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.