Correlation Between Vanguard Growth and Future Fund

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

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

Diversification Opportunities for Vanguard Growth and Future Fund

0.92

Correlation Coefficient

Vanguard Growth  Future Fund

Almost no diversification

The 3 months correlation between Vanguard and Future is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Growth Index and The Future Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Future Fund and Vanguard Growth 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 Growth Index are associated (or correlated) with Future Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Future Fund has no effect on the direction of Vanguard Growth i.e., Vanguard Growth and Future Fund go up and down completely randomly.

Pair Corralation between Vanguard Growth and Future Fund

Considering the 90-day investment horizon Vanguard Growth Index is expected to under-perform the Future Fund. In addition to that, Vanguard Growth is 1.08 times more volatile than The Future Fund. It trades about -0.03 of its total potential returns per unit of risk. The Future Fund is currently generating about 0.1 per unit of volatility. If you would invest  2,613  in The Future Fund on October 25, 2024 and sell it today you would earn a total of  48.00  from holding The Future Fund or generate 1.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	94.74%
Values	Daily Returns

Vanguard Growth Index  vs.  The Future Fund

Vanguard Growth Index

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Growth Index are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, Vanguard Growth may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Future Fund

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Future Fund are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting basic indicators, Future Fund may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Vanguard Growth and Future Fund

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

The idea behind Vanguard Growth Index and The Future 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 Transaction History module to view history of all your transactions and understand their impact on performance.