Correlation Between Fundamental Large and Vanguard Total

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

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

Diversification Opportunities for Fundamental Large and Vanguard Total

0.38

Correlation Coefficient

Fundamental Large  Vanguard Total

Weak diversification

The 3 months correlation between Fundamental and Vanguard is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Fundamental Large Cap 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 Fundamental Large 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 Fundamental Large Cap 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 Fundamental Large i.e., Fundamental Large and Vanguard Total go up and down completely randomly.

Pair Corralation between Fundamental Large and Vanguard Total

Assuming the 90 days horizon Fundamental Large is expected to generate 2.28 times less return on investment than Vanguard Total. In addition to that, Fundamental Large is 1.24 times more volatile than Vanguard Total Stock. It trades about 0.04 of its total potential returns per unit of risk. Vanguard Total Stock is currently generating about 0.1 per unit of volatility. If you would invest  10,619  in Vanguard Total Stock on December 2, 2024 and sell it today you would earn a total of  3,642  from holding Vanguard Total Stock or generate 34.3% return on investment over 90 days.

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

Fundamental Large Cap  vs.  Vanguard Total Stock

Fundamental Large Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fundamental Large Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund 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 Fundamental Large and Vanguard Total

The main advantage of trading using opposite Fundamental Large and Vanguard Total positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fundamental Large 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 Fundamental Large Cap 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.