Correlation Between Vanguard Tax and Invesco QQQ

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

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

Diversification Opportunities for Vanguard Tax and Invesco QQQ

-0.36

Correlation Coefficient

Vanguard Tax  Invesco QQQ

Very good diversification

The 3 months correlation between Vanguard and Invesco is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Tax Managed Funds and Invesco QQQ Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco QQQ Trust and Vanguard Tax 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 Tax Managed Funds are associated (or correlated) with Invesco QQQ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco QQQ Trust has no effect on the direction of Vanguard Tax i.e., Vanguard Tax and Invesco QQQ go up and down completely randomly.

Pair Corralation between Vanguard Tax and Invesco QQQ

Assuming the 90 days trading horizon Vanguard Tax Managed Funds is expected to generate 0.68 times more return on investment than Invesco QQQ. However, Vanguard Tax Managed Funds is 1.48 times less risky than Invesco QQQ. It trades about 0.13 of its potential returns per unit of risk. Invesco QQQ Trust is currently generating about -0.13 per unit of risk. If you would invest  98,195  in Vanguard Tax Managed Funds on December 30, 2024 and sell it today you would earn a total of  6,527  from holding Vanguard Tax Managed Funds or generate 6.65% return on investment over 90 days.

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

Vanguard Tax Managed Funds  vs.  Invesco QQQ Trust

Vanguard Tax Managed

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Tax Managed Funds are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Vanguard Tax may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Invesco QQQ Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco QQQ Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

Pair Trading with Vanguard Tax and Invesco QQQ

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

The idea behind Vanguard Tax Managed Funds and Invesco QQQ Trust 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.