Correlation Between Vanguard 500 and 694308KD8

Can any of the company-specific risk be diversified away by investing in both Vanguard 500 and 694308KD8 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 694308KD8 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 PCG 525 01 MAR 52, you can compare the effects of market volatilities on Vanguard 500 and 694308KD8 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 694308KD8. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard 500 and 694308KD8.

Diversification Opportunities for Vanguard 500 and 694308KD8

0.05

Correlation Coefficient

Vanguard 500  694308KD8

Significant diversification

The 3 months correlation between Vanguard and 694308KD8 is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard 500 Index and PCG 525 01 MAR 52 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PCG 525 01 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 694308KD8. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PCG 525 01 has no effect on the direction of Vanguard 500 i.e., Vanguard 500 and 694308KD8 go up and down completely randomly.

Pair Corralation between Vanguard 500 and 694308KD8

Assuming the 90 days horizon Vanguard 500 Index is expected to under-perform the 694308KD8. But the mutual fund apears to be less risky and, when comparing its historical volatility, Vanguard 500 Index is 1.32 times less risky than 694308KD8. The mutual fund trades about -0.18 of its potential returns per unit of risk. The PCG 525 01 MAR 52 is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  9,393  in PCG 525 01 MAR 52 on October 5, 2024 and sell it today you would lose (204.00) from holding PCG 525 01 MAR 52 or give up 2.17% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	85.0%
Values	Daily Returns

Vanguard 500 Index  vs.  PCG 525 01 MAR 52

Vanguard 500 Index

Risk-Adjusted Performance

6 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard 500 Index are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Vanguard 500 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

PCG 525 01

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PCG 525 01 MAR 52 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 694308KD8 is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vanguard 500 and 694308KD8

The main advantage of trading using opposite Vanguard 500 and 694308KD8 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard 500 position performs unexpectedly, 694308KD8 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 694308KD8 will offset losses from the drop in 694308KD8's long position.

The idea behind Vanguard 500 Index and PCG 525 01 MAR 52 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.