Correlation Between Vanguard Total and Vanguard Growth

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

By analyzing existing cross correlation between Vanguard Total World and Vanguard Growth Index, you can compare the effects of market volatilities on Vanguard Total and Vanguard Growth 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 Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Total and Vanguard Growth.

Diversification Opportunities for Vanguard Total and Vanguard Growth

0.71

Correlation Coefficient

Vanguard Total  Vanguard Growth

Poor diversification

The 3 months correlation between Vanguard and Vanguard is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total World and Vanguard Growth Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Growth Index 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 World are associated (or correlated) with Vanguard Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Growth Index has no effect on the direction of Vanguard Total i.e., Vanguard Total and Vanguard Growth go up and down completely randomly.

Pair Corralation between Vanguard Total and Vanguard Growth

Assuming the 90 days horizon Vanguard Total World is expected to generate 0.62 times more return on investment than Vanguard Growth. However, Vanguard Total World is 1.61 times less risky than Vanguard Growth. It trades about -0.02 of its potential returns per unit of risk. Vanguard Growth Index is currently generating about -0.12 per unit of risk. If you would invest  4,159  in Vanguard Total World on December 30, 2024 and sell it today you would lose (56.00) from holding Vanguard Total World or give up 1.35% of portfolio value over 90 days.

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

Vanguard Total World  vs.  Vanguard Growth Index

Vanguard Total World

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Total World has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Vanguard Total is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Vanguard Growth Index

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Vanguard Total and Vanguard Growth

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

The idea behind Vanguard Total World and Vanguard Growth Index 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.