Correlation Between Vanguard Growth and Vanguard Health

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

Diversification Opportunities for Vanguard Growth and Vanguard Health

-0.07

Correlation Coefficient

Vanguard Growth  Vanguard Health

Good diversification

The 3 months correlation between Vanguard and Vanguard is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Growth Index and Vanguard Health Care in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Health Care 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 Vanguard Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Health Care has no effect on the direction of Vanguard Growth i.e., Vanguard Growth and Vanguard Health go up and down completely randomly.

Pair Corralation between Vanguard Growth and Vanguard Health

Considering the 90-day investment horizon Vanguard Growth Index is expected to under-perform the Vanguard Health. In addition to that, Vanguard Growth is 1.83 times more volatile than Vanguard Health Care. It trades about -0.09 of its total potential returns per unit of risk. Vanguard Health Care is currently generating about 0.09 per unit of volatility. If you would invest  25,230  in Vanguard Health Care on December 29, 2024 and sell it today you would earn a total of  1,060  from holding Vanguard Health Care or generate 4.2% return on investment over 90 days.

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

Vanguard Growth Index  vs.  Vanguard Health Care

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 investors with long positions. Despite latest abnormal performance, the Etf's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the Exchange Traded Fund stockholders.

Vanguard Health Care

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Health Care are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical indicators, Vanguard Health is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Vanguard Growth and Vanguard Health

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

The idea behind Vanguard Growth Index and Vanguard Health Care 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.