Correlation Between Vanguard Target and Longleaf Partners

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

By analyzing existing cross correlation between Vanguard Target Retirement and Longleaf Partners Fund, you can compare the effects of market volatilities on Vanguard Target and Longleaf Partners 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 Target with a short position of Longleaf Partners. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Target and Longleaf Partners.

Diversification Opportunities for Vanguard Target and Longleaf Partners

0.39

Correlation Coefficient

Vanguard Target  Longleaf Partners

Weak diversification

The 3 months correlation between Vanguard and Longleaf is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Target Retirement and Longleaf Partners Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Longleaf Partners and Vanguard Target 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 Target Retirement are associated (or correlated) with Longleaf Partners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Longleaf Partners has no effect on the direction of Vanguard Target i.e., Vanguard Target and Longleaf Partners go up and down completely randomly.

Pair Corralation between Vanguard Target and Longleaf Partners

Assuming the 90 days horizon Vanguard Target Retirement is expected to generate 0.59 times more return on investment than Longleaf Partners. However, Vanguard Target Retirement is 1.68 times less risky than Longleaf Partners. It trades about 0.02 of its potential returns per unit of risk. Longleaf Partners Fund is currently generating about -0.1 per unit of risk. If you would invest  1,872  in Vanguard Target Retirement on December 30, 2024 and sell it today you would earn a total of  8.00  from holding Vanguard Target Retirement or generate 0.43% return on investment over 90 days.

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

Vanguard Target Retirement  vs.  Longleaf Partners Fund

Vanguard Target Reti

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Target Retirement are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Vanguard Target is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Longleaf Partners

Risk-Adjusted Performance

Very Weak

Over the last 90 days Longleaf Partners Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Longleaf Partners 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 Target and Longleaf Partners

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

The idea behind Vanguard Target Retirement and Longleaf Partners Fund 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.