Correlation Between Vanguard 500 and Provident Trust
Can any of the company-specific risk be diversified away by investing in both Vanguard 500 and Provident Trust 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 500 and Provident Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard 500 Index and Provident Trust Strategy, you can compare the effects of market volatilities on Vanguard 500 and Provident Trust 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 500 with a short position of Provident Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard 500 and Provident Trust.
Diversification Opportunities for Vanguard 500 and Provident Trust
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vanguard and Provident is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard 500 Index and Provident Trust Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Provident Trust Strategy and Vanguard 500 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 500 Index are associated (or correlated) with Provident Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Provident Trust Strategy has no effect on the direction of Vanguard 500 i.e., Vanguard 500 and Provident Trust go up and down completely randomly.
Pair Corralation between Vanguard 500 and Provident Trust
Assuming the 90 days horizon Vanguard 500 Index is expected to generate 0.98 times more return on investment than Provident Trust. However, Vanguard 500 Index is 1.02 times less risky than Provident Trust. It trades about 0.12 of its potential returns per unit of risk. Provident Trust Strategy is currently generating about 0.07 per unit of risk. If you would invest 18,353 in Vanguard 500 Index on September 25, 2024 and sell it today you would earn a total of 10,867 from holding Vanguard 500 Index or generate 59.21% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Vanguard 500 Index vs. Provident Trust Strategy
Performance |
Timeline |
Vanguard 500 Index |
Provident Trust Strategy |
Vanguard 500 and Provident Trust Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Vanguard 500 and Provident Trust
The main advantage of trading using opposite Vanguard 500 and Provident Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard 500 position performs unexpectedly, Provident Trust 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 Provident Trust will offset losses from the drop in Provident Trust's long position.Vanguard 500 vs. Vanguard International Growth | Vanguard 500 vs. Vanguard Wellington Fund | Vanguard 500 vs. Vanguard Windsor Ii |
Provident Trust vs. Polen Growth Fund | Provident Trust vs. Edgewood Growth Fund | Provident Trust vs. Advantage Portfolio Class | Provident Trust vs. Parnassus Mid Cap |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
Other Complementary Tools
Equity Valuation Check real value of public entities based on technical and fundamental data | |
Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities | |
Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences | |
Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets |