Correlation Between Vanguard Total and Stocksplus Total

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

By analyzing existing cross correlation between Vanguard Total Stock and Stocksplus Total Return, you can compare the effects of market volatilities on Vanguard Total and Stocksplus Total 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 Total with a short position of Stocksplus Total. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Total and Stocksplus Total.

Diversification Opportunities for Vanguard Total and Stocksplus Total

0.99

Correlation Coefficient

Vanguard Total  Stocksplus Total

No risk reduction

The 3 months correlation between Vanguard and Stocksplus is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Stock and Stocksplus Total Return in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stocksplus Total Return and Vanguard Total 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 Total Stock are associated (or correlated) with Stocksplus Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stocksplus Total Return has no effect on the direction of Vanguard Total i.e., Vanguard Total and Stocksplus Total go up and down completely randomly.

Pair Corralation between Vanguard Total and Stocksplus Total

Assuming the 90 days horizon Vanguard Total Stock is expected to generate 0.97 times more return on investment than Stocksplus Total. However, Vanguard Total Stock is 1.03 times less risky than Stocksplus Total. It trades about 0.21 of its potential returns per unit of risk. Stocksplus Total Return is currently generating about 0.2 per unit of risk. If you would invest  13,217  in Vanguard Total Stock on September 3, 2024 and sell it today you would earn a total of  1,375  from holding Vanguard Total Stock or generate 10.4% return on investment over 90 days.

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

Vanguard Total Stock  vs.  Stocksplus Total Return

Vanguard Total Stock

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Total Stock are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Vanguard Total may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Stocksplus Total Return

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Stocksplus Total Return are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Stocksplus Total may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Vanguard Total and Stocksplus Total

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

The idea behind Vanguard Total Stock and Stocksplus Total Return 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.