Correlation Between Vanguard Health and Vanguard Star

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Can any of the company-specific risk be diversified away by investing in both Vanguard Health and Vanguard Star 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 Health and Vanguard Star into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Health Care and Vanguard Star Fund, you can compare the effects of market volatilities on Vanguard Health and Vanguard Star 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 Health with a short position of Vanguard Star. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Health and Vanguard Star.

Diversification Opportunities for Vanguard Health and Vanguard Star

VanguardVanguardDiversified AwayVanguardVanguardDiversified Away100%
0.8
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Vanguard and Vanguard is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Health Care and Vanguard Star Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Star and Vanguard Health 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 Health Care are associated (or correlated) with Vanguard Star. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Star has no effect on the direction of Vanguard Health i.e., Vanguard Health and Vanguard Star go up and down completely randomly.

Pair Corralation between Vanguard Health and Vanguard Star

Assuming the 90 days horizon Vanguard Health Care is expected to under-perform the Vanguard Star. In addition to that, Vanguard Health is 1.38 times more volatile than Vanguard Star Fund. It trades about -0.01 of its total potential returns per unit of risk. Vanguard Star Fund is currently generating about 0.06 per unit of volatility. If you would invest  2,358  in Vanguard Star Fund on November 30, 2024 and sell it today you would earn a total of  459.00  from holding Vanguard Star Fund or generate 19.47% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Vanguard Health Care  vs.  Vanguard Star Fund

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb 0510
JavaScript chart by amCharts 3.21.15VGHCX VGSTX
       Timeline  
Vanguard Health Care 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Vanguard Health Care has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb185190195200205210
Vanguard Star 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Vanguard Star Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Vanguard Star is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb27.52828.52929.5

Vanguard Health and Vanguard Star Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-2.28-1.75-1.22-0.69-0.160.320.851.381.91 0.10.20.30.40.50.6
JavaScript chart by amCharts 3.21.15VGHCX VGSTX
       Returns  

Pair Trading with Vanguard Health and Vanguard Star

The main advantage of trading using opposite Vanguard Health and Vanguard Star positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Health position performs unexpectedly, Vanguard Star 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 Star will offset losses from the drop in Vanguard Star's long position.
The idea behind Vanguard Health Care and Vanguard Star Fund 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.

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