Correlation Between Vanguard Funds and Vanguard LifeStrategy

Can any of the company-specific risk be diversified away by investing in both Vanguard Funds and Vanguard LifeStrategy 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 LifeStrategy 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 LifeStrategy 60, you can compare the effects of market volatilities on Vanguard Funds and Vanguard LifeStrategy 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 LifeStrategy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Funds and Vanguard LifeStrategy.

Diversification Opportunities for Vanguard Funds and Vanguard LifeStrategy

0.13

Correlation Coefficient

Vanguard Funds  Vanguard LifeStrategy

Average diversification

The 3 months correlation between Vanguard and Vanguard is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Funds Public and Vanguard LifeStrategy 60 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard LifeStrategy 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 LifeStrategy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard LifeStrategy has no effect on the direction of Vanguard Funds i.e., Vanguard Funds and Vanguard LifeStrategy go up and down completely randomly.

Pair Corralation between Vanguard Funds and Vanguard LifeStrategy

Assuming the 90 days trading horizon Vanguard Funds Public is expected to under-perform the Vanguard LifeStrategy. But the etf apears to be less risky and, when comparing its historical volatility, Vanguard Funds Public is 1.64 times less risky than Vanguard LifeStrategy. The etf trades about -0.07 of its potential returns per unit of risk. The Vanguard LifeStrategy 60 is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  3,142  in Vanguard LifeStrategy 60 on October 26, 2024 and sell it today you would earn a total of  114.00  from holding Vanguard LifeStrategy 60 or generate 3.63% return on investment over 90 days.

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

Vanguard Funds Public  vs.  Vanguard LifeStrategy 60

Vanguard Funds Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Funds Public has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Vanguard Funds is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Vanguard LifeStrategy

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard LifeStrategy 60 are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Vanguard LifeStrategy is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Vanguard Funds and Vanguard LifeStrategy

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

The idea behind Vanguard Funds Public and Vanguard LifeStrategy 60 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.