Correlation Between Vanguard and Overlay Shares
Can any of the company-specific risk be diversified away by investing in both Vanguard and Overlay Shares 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 Overlay Shares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard SP 500 and Overlay Shares Large, you can compare the effects of market volatilities on Vanguard and Overlay Shares 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 Overlay Shares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard and Overlay Shares.
Diversification Opportunities for Vanguard and Overlay Shares
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Vanguard and Overlay is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard SP 500 and Overlay Shares Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Overlay Shares Large 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 500 are associated (or correlated) with Overlay Shares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Overlay Shares Large has no effect on the direction of Vanguard i.e., Vanguard and Overlay Shares go up and down completely randomly.
Pair Corralation between Vanguard and Overlay Shares
Considering the 90-day investment horizon Vanguard SP 500 is expected to generate 0.81 times more return on investment than Overlay Shares. However, Vanguard SP 500 is 1.23 times less risky than Overlay Shares. It trades about -0.05 of its potential returns per unit of risk. Overlay Shares Large is currently generating about -0.06 per unit of risk. If you would invest 53,912 in Vanguard SP 500 on December 28, 2024 and sell it today you would lose (1,791) from holding Vanguard SP 500 or give up 3.32% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 98.36% |
Values | Daily Returns |
Vanguard SP 500 vs. Overlay Shares Large
Performance |
Timeline |
Vanguard SP 500 |
Overlay Shares Large |
Vanguard and Overlay Shares Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Vanguard and Overlay Shares
The main advantage of trading using opposite Vanguard and Overlay Shares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard position performs unexpectedly, Overlay Shares 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 Overlay Shares will offset losses from the drop in Overlay Shares' long position.Vanguard vs. Vanguard Total Stock | Vanguard vs. Vanguard High Dividend | Vanguard vs. Vanguard Information Technology | Vanguard vs. Invesco QQQ Trust |
Overlay Shares vs. Overlay Shares Core | Overlay Shares vs. OVS SpA | Overlay Shares vs. Overlay Shares Foreign | Overlay Shares vs. Overlay Shares Municipal |
Check out your portfolio center.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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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