Correlation Between Vanguard Primecap and Nasdaq-100(r)

Can any of the company-specific risk be diversified away by investing in both Vanguard Primecap and Nasdaq-100(r) 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 Primecap and Nasdaq-100(r) into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Vanguard Primecap Fund and Nasdaq 100 2x Strategy, you can compare the effects of market volatilities on Vanguard Primecap and Nasdaq-100(r) 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 Primecap with a short position of Nasdaq-100(r). Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Primecap and Nasdaq-100(r).

Diversification Opportunities for Vanguard Primecap and Nasdaq-100(r)

0.47

Correlation Coefficient

Vanguard Primecap  Nasdaq-100(r)

Very weak diversification

The 3 months correlation between Vanguard and Nasdaq-100(r) is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Primecap Fund and Nasdaq 100 2x Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nasdaq 100 2x and Vanguard Primecap 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 Primecap Fund are associated (or correlated) with Nasdaq-100(r). Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nasdaq 100 2x has no effect on the direction of Vanguard Primecap i.e., Vanguard Primecap and Nasdaq-100(r) go up and down completely randomly.

Pair Corralation between Vanguard Primecap and Nasdaq-100(r)

Assuming the 90 days horizon Vanguard Primecap is expected to generate 3.92 times less return on investment than Nasdaq-100(r). But when comparing it to its historical volatility, Vanguard Primecap Fund is 2.44 times less risky than Nasdaq-100(r). It trades about 0.06 of its potential returns per unit of risk. Nasdaq 100 2x Strategy is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  15,297  in Nasdaq 100 2x Strategy on October 4, 2024 and sell it today you would earn a total of  23,269  from holding Nasdaq 100 2x Strategy or generate 152.11% return on investment over 90 days.

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

Vanguard Primecap Fund  vs.  Nasdaq 100 2x Strategy

Vanguard Primecap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Primecap Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Nasdaq 100 2x

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nasdaq 100 2x Strategy has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Nasdaq-100(r) is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vanguard Primecap and Nasdaq-100(r)

The main advantage of trading using opposite Vanguard Primecap and Nasdaq-100(r) positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Primecap position performs unexpectedly, Nasdaq-100(r) 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 Nasdaq-100(r) will offset losses from the drop in Nasdaq-100(r)'s long position.

The idea behind Vanguard Primecap Fund and Nasdaq 100 2x Strategy 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.