Correlation Between Vanguard Strategic and Old Westbury

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

By analyzing existing cross correlation between Vanguard Strategic Small Cap and Old Westbury Large, you can compare the effects of market volatilities on Vanguard Strategic and Old Westbury 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 Strategic with a short position of Old Westbury. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Strategic and Old Westbury.

Diversification Opportunities for Vanguard Strategic and Old Westbury

0.84

Correlation Coefficient

Vanguard Strategic  Old Westbury

Very poor diversification

The 3 months correlation between VANGUARD and Old is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Strategic Small Cap and Old Westbury Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Old Westbury Large and Vanguard Strategic 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 Strategic Small Cap are associated (or correlated) with Old Westbury. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Old Westbury Large has no effect on the direction of Vanguard Strategic i.e., Vanguard Strategic and Old Westbury go up and down completely randomly.

Pair Corralation between Vanguard Strategic and Old Westbury

Assuming the 90 days horizon Vanguard Strategic Small Cap is expected to generate 1.79 times more return on investment than Old Westbury. However, Vanguard Strategic is 1.79 times more volatile than Old Westbury Large. It trades about 0.14 of its potential returns per unit of risk. Old Westbury Large is currently generating about 0.09 per unit of risk. If you would invest  4,227  in Vanguard Strategic Small Cap on August 30, 2024 and sell it today you would earn a total of  452.00  from holding Vanguard Strategic Small Cap or generate 10.69% return on investment over 90 days.

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

Vanguard Strategic Small Cap  vs.  Old Westbury Large

Vanguard Strategic

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Strategic Small Cap are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Vanguard Strategic may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Old Westbury Large

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Old Westbury Large are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Old Westbury 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 Strategic and Old Westbury

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

The idea behind Vanguard Strategic Small Cap and Old Westbury Large 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.