Correlation Between Vanguard Growth and Tweedy Browne

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

By analyzing existing cross correlation between Vanguard Growth Index and Tweedy Browne Worldwide, you can compare the effects of market volatilities on Vanguard Growth and Tweedy Browne 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 Growth with a short position of Tweedy Browne. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Growth and Tweedy Browne.

Diversification Opportunities for Vanguard Growth and Tweedy Browne

-0.68

Correlation Coefficient

Vanguard Growth  Tweedy Browne

Excellent diversification

The 3 months correlation between Vanguard and Tweedy is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Growth Index and Tweedy Browne Worldwide in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tweedy Browne Worldwide and Vanguard Growth 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 Growth Index are associated (or correlated) with Tweedy Browne. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tweedy Browne Worldwide has no effect on the direction of Vanguard Growth i.e., Vanguard Growth and Tweedy Browne go up and down completely randomly.

Pair Corralation between Vanguard Growth and Tweedy Browne

Assuming the 90 days horizon Vanguard Growth Index is expected to under-perform the Tweedy Browne. In addition to that, Vanguard Growth is 1.92 times more volatile than Tweedy Browne Worldwide. It trades about -0.12 of its total potential returns per unit of risk. Tweedy Browne Worldwide is currently generating about 0.24 per unit of volatility. If you would invest  538.00  in Tweedy Browne Worldwide on December 21, 2024 and sell it today you would earn a total of  57.00  from holding Tweedy Browne Worldwide or generate 10.59% return on investment over 90 days.

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

Vanguard Growth Index  vs.  Tweedy Browne Worldwide

Vanguard Growth Index

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Growth Index has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Tweedy Browne Worldwide

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tweedy Browne Worldwide are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Tweedy Browne may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Vanguard Growth and Tweedy Browne

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

The idea behind Vanguard Growth Index and Tweedy Browne Worldwide 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 Anywhere module to track or share privately all of your investments from the convenience of any device.