Correlation Between Vanguard Funds and Vanguard Russell

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

By analyzing existing cross correlation between Vanguard Funds Public and Vanguard Russell 2000, you can compare the effects of market volatilities on Vanguard Funds and Vanguard Russell 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 Funds with a short position of Vanguard Russell. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Funds and Vanguard Russell.

Diversification Opportunities for Vanguard Funds and Vanguard Russell

0.43

Correlation Coefficient

Vanguard Funds  Vanguard Russell

Very weak diversification

The 3 months correlation between Vanguard and Vanguard is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Funds Public and Vanguard Russell 2000 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Russell 2000 and Vanguard Funds 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 Funds Public are associated (or correlated) with Vanguard Russell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Russell 2000 has no effect on the direction of Vanguard Funds i.e., Vanguard Funds and Vanguard Russell go up and down completely randomly.

Pair Corralation between Vanguard Funds and Vanguard Russell

Assuming the 90 days horizon Vanguard Funds is expected to generate 12.22 times less return on investment than Vanguard Russell. But when comparing it to its historical volatility, Vanguard Funds Public is 6.17 times less risky than Vanguard Russell. It trades about 0.08 of its potential returns per unit of risk. Vanguard Russell 2000 is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  32,912  in Vanguard Russell 2000 on September 2, 2024 and sell it today you would earn a total of  4,491  from holding Vanguard Russell 2000 or generate 13.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	87.5%
Values	Daily Returns

Vanguard Funds Public  vs.  Vanguard Russell 2000

Vanguard Funds Public

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Funds Public are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental drivers, Vanguard Funds is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Vanguard Russell 2000

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Russell 2000 are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward indicators, Vanguard Russell showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vanguard Funds and Vanguard Russell

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

The idea behind Vanguard Funds Public and Vanguard Russell 2000 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.