Correlation Between Vanguard Extended and Vanguard Wellesley
Can any of the company-specific risk be diversified away by investing in both Vanguard Extended and Vanguard Wellesley 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 Extended and Vanguard Wellesley into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Extended Market and Vanguard Wellesley Income, you can compare the effects of market volatilities on Vanguard Extended and Vanguard Wellesley 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 Extended with a short position of Vanguard Wellesley. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Extended and Vanguard Wellesley.
Diversification Opportunities for Vanguard Extended and Vanguard Wellesley
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Vanguard and Vanguard is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Extended Market and Vanguard Wellesley Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Wellesley Income and Vanguard Extended 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 Extended Market are associated (or correlated) with Vanguard Wellesley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Wellesley Income has no effect on the direction of Vanguard Extended i.e., Vanguard Extended and Vanguard Wellesley go up and down completely randomly.
Pair Corralation between Vanguard Extended and Vanguard Wellesley
Assuming the 90 days horizon Vanguard Extended Market is expected to under-perform the Vanguard Wellesley. In addition to that, Vanguard Extended is 2.99 times more volatile than Vanguard Wellesley Income. It trades about -0.26 of its total potential returns per unit of risk. Vanguard Wellesley Income is currently generating about -0.34 per unit of volatility. If you would invest 2,541 in Vanguard Wellesley Income on September 24, 2024 and sell it today you would lose (69.00) from holding Vanguard Wellesley Income or give up 2.72% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Vanguard Extended Market vs. Vanguard Wellesley Income
Performance |
Timeline |
Vanguard Extended Market |
Vanguard Wellesley Income |
Vanguard Extended and Vanguard Wellesley Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Vanguard Extended and Vanguard Wellesley
The main advantage of trading using opposite Vanguard Extended and Vanguard Wellesley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Extended position performs unexpectedly, Vanguard Wellesley 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 Wellesley will offset losses from the drop in Vanguard Wellesley's long position.Vanguard Extended vs. Vanguard Total International | Vanguard Extended vs. Vanguard Total Bond | Vanguard Extended vs. Vanguard Institutional Index | Vanguard Extended vs. Vanguard Institutional Index |
Vanguard Wellesley vs. Vanguard Wellington Fund | Vanguard Wellesley vs. Vanguard Dividend Growth | Vanguard Wellesley vs. Vanguard Gnma Fund | Vanguard Wellesley vs. Vanguard Equity Income |
Check out your portfolio center.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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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