Correlation Between Vanguard Diversified and Vanguard Managed

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

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

Diversification Opportunities for Vanguard Diversified and Vanguard Managed

-0.22

Correlation Coefficient

Vanguard Diversified  Vanguard Managed

Very good diversification

The 3 months correlation between Vanguard and Vanguard is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Diversified Equity and Vanguard Managed Payout in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Managed Payout and Vanguard Diversified 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 Diversified Equity are associated (or correlated) with Vanguard Managed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Managed Payout has no effect on the direction of Vanguard Diversified i.e., Vanguard Diversified and Vanguard Managed go up and down completely randomly.

Pair Corralation between Vanguard Diversified and Vanguard Managed

If you would invest  5,296  in Vanguard Diversified Equity on September 16, 2024 and sell it today you would earn a total of  189.00  from holding Vanguard Diversified Equity or generate 3.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	4.76%
Values	Daily Returns

Vanguard Diversified Equity  vs.  Vanguard Managed Payout

Vanguard Diversified

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Diversified Equity 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 Diversified may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Vanguard Managed Payout

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Vanguard Diversified and Vanguard Managed

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

The idea behind Vanguard Diversified Equity and Vanguard Managed Payout 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..