Correlation Between Vanguard and Timothy Plan

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

By analyzing existing cross correlation between Vanguard SP Small Cap and Timothy Plan LargeMid, you can compare the effects of market volatilities on Vanguard and Timothy Plan 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 with a short position of Timothy Plan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard and Timothy Plan.

Diversification Opportunities for Vanguard and Timothy Plan

0.91

Correlation Coefficient

Vanguard  Timothy Plan

Almost no diversification

The 3 months correlation between Vanguard and Timothy is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard SP Small Cap and Timothy Plan LargeMid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Timothy Plan LargeMid and Vanguard 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 SP Small Cap are associated (or correlated) with Timothy Plan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Timothy Plan LargeMid has no effect on the direction of Vanguard i.e., Vanguard and Timothy Plan go up and down completely randomly.

Pair Corralation between Vanguard and Timothy Plan

Given the investment horizon of 90 days Vanguard SP Small Cap is expected to under-perform the Timothy Plan. In addition to that, Vanguard is 1.33 times more volatile than Timothy Plan LargeMid. It trades about -0.12 of its total potential returns per unit of risk. Timothy Plan LargeMid is currently generating about -0.02 per unit of volatility. If you would invest  4,284  in Timothy Plan LargeMid on December 28, 2024 and sell it today you would lose (63.00) from holding Timothy Plan LargeMid or give up 1.47% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Vanguard SP Small Cap  vs.  Timothy Plan LargeMid

Vanguard SP Small

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard SP Small Cap has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest abnormal performance, the Etf's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the Exchange Traded Fund stockholders.

Timothy Plan LargeMid

Risk-Adjusted Performance

Very Weak

Over the last 90 days Timothy Plan LargeMid has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, Timothy Plan is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Vanguard and Timothy Plan

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

The idea behind Vanguard SP Small Cap and Timothy Plan LargeMid 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.