Correlation Between Vanguard Total and SOFR
Can any of the company-specific risk be diversified away by investing in both Vanguard Total and SOFR 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 Total and SOFR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Total Stock and SOFR, you can compare the effects of market volatilities on Vanguard Total and SOFR 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 Total with a short position of SOFR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Total and SOFR.
Diversification Opportunities for Vanguard Total and SOFR
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Vanguard and SOFR is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Stock and SOFR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SOFR and Vanguard Total 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 Total Stock are associated (or correlated) with SOFR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SOFR has no effect on the direction of Vanguard Total i.e., Vanguard Total and SOFR go up and down completely randomly.
Pair Corralation between Vanguard Total and SOFR
Considering the 90-day investment horizon Vanguard Total Stock is expected to generate 22.05 times more return on investment than SOFR. However, Vanguard Total is 22.05 times more volatile than SOFR. It trades about 0.09 of its potential returns per unit of risk. SOFR is currently generating about 0.49 per unit of risk. If you would invest 28,129 in Vanguard Total Stock on September 22, 2024 and sell it today you would earn a total of 1,199 from holding Vanguard Total Stock or generate 4.26% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Vanguard Total Stock vs. SOFR
Performance |
Timeline |
Vanguard Total Stock |
SOFR |
Vanguard Total and SOFR Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Vanguard Total and SOFR
The main advantage of trading using opposite Vanguard Total and SOFR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Total position performs unexpectedly, SOFR 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 SOFR will offset losses from the drop in SOFR's long position.Vanguard Total vs. Vanguard SP 500 | Vanguard Total vs. Vanguard Total International | Vanguard Total vs. Vanguard Real Estate | Vanguard Total vs. Vanguard Total Bond |
SOFR vs. Vanguard Total Stock | SOFR vs. SPDR SP 500 | SOFR vs. iShares Core SP | SOFR vs. Vanguard Total Bond |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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