Correlation Between Vanguard Funds and Vanguard Index

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

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

Diversification Opportunities for Vanguard Funds and Vanguard Index

0.79

Correlation Coefficient

Vanguard Funds  Vanguard Index

Poor diversification

The 3 months correlation between Vanguard and Vanguard is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Funds Public and Vanguard Index Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Index Funds and Vanguard Funds 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 Funds Public are associated (or correlated) with Vanguard Index. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Index Funds has no effect on the direction of Vanguard Funds i.e., Vanguard Funds and Vanguard Index go up and down completely randomly.

Pair Corralation between Vanguard Funds and Vanguard Index

Assuming the 90 days trading horizon Vanguard Funds is expected to generate 5.87 times less return on investment than Vanguard Index. But when comparing it to its historical volatility, Vanguard Funds Public is 1.39 times less risky than Vanguard Index. It trades about 0.05 of its potential returns per unit of risk. Vanguard Index Funds is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  448,955  in Vanguard Index Funds on September 4, 2024 and sell it today you would earn a total of  83,045  from holding Vanguard Index Funds or generate 18.5% return on investment over 90 days.

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

Vanguard Funds Public  vs.  Vanguard Index Funds

Vanguard Funds Public

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Funds Public are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, Vanguard Funds is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Vanguard Index Funds

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Index Funds are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak primary indicators, Vanguard Index showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vanguard Funds and Vanguard Index

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

The idea behind Vanguard Funds Public and Vanguard Index Funds 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 Commodity Directory module to find actively traded commodities issued by global exchanges.