Correlation Between Vanguard Total and Vanguard Value

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

Diversification Opportunities for Vanguard Total and Vanguard Value

0.57

Correlation Coefficient

Vanguard Total  Vanguard Value

Very weak diversification

The 3 months correlation between Vanguard and Vanguard is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Stock and Vanguard Value Factor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Value Factor 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 Vanguard Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Value Factor has no effect on the direction of Vanguard Total i.e., Vanguard Total and Vanguard Value go up and down completely randomly.

Pair Corralation between Vanguard Total and Vanguard Value

Considering the 90-day investment horizon Vanguard Total Stock is expected to generate 0.99 times more return on investment than Vanguard Value. However, Vanguard Total Stock is 1.01 times less risky than Vanguard Value. It trades about -0.04 of its potential returns per unit of risk. Vanguard Value Factor is currently generating about -0.13 per unit of risk. If you would invest  29,890  in Vanguard Total Stock on November 28, 2024 and sell it today you would lose (595.00) from holding Vanguard Total Stock or give up 1.99% of portfolio value over 90 days.

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

Vanguard Total Stock  vs.  Vanguard Value Factor

Vanguard Total Stock

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Total Stock has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Vanguard Total is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Vanguard Value Factor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Value Factor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Etf's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

Pair Trading with Vanguard Total and Vanguard Value

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

The idea behind Vanguard Total Stock and Vanguard Value Factor 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.