Correlation Between Vanguard and SWP Growth

Can any of the company-specific risk be diversified away by investing in both Vanguard and SWP Growth 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 SWP Growth 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 SWP Growth Income, you can compare the effects of market volatilities on Vanguard and SWP Growth 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 SWP Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard and SWP Growth.

Diversification Opportunities for Vanguard and SWP Growth

0.43

Correlation Coefficient

Vanguard  SWP Growth

Very weak diversification

The 3 months correlation between Vanguard and SWP is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard SP 500 and SWP Growth Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SWP Growth Income 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 SWP Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SWP Growth Income has no effect on the direction of Vanguard i.e., Vanguard and SWP Growth go up and down completely randomly.

Pair Corralation between Vanguard and SWP Growth

Considering the 90-day investment horizon Vanguard SP 500 is expected to generate 1.04 times more return on investment than SWP Growth. However, Vanguard is 1.04 times more volatile than SWP Growth Income. It trades about 0.19 of its potential returns per unit of risk. SWP Growth Income is currently generating about 0.12 per unit of risk. If you would invest  51,224  in Vanguard SP 500 on September 12, 2024 and sell it today you would earn a total of  4,209  from holding Vanguard SP 500 or generate 8.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	85.71%
Values	Daily Returns

Vanguard SP 500  vs.  SWP Growth Income

Vanguard SP 500

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard SP 500 are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent basic indicators, Vanguard may actually be approaching a critical reversion point that can send shares even higher in January 2025.

SWP Growth Income

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SWP Growth Income are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, SWP Growth is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Vanguard and SWP Growth

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

The idea behind Vanguard SP 500 and SWP Growth Income 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.