Correlation Between Vanguard USD and Vanguard

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

By analyzing existing cross correlation between Vanguard USD Treasury and Vanguard SP 500, you can compare the effects of market volatilities on Vanguard USD and Vanguard 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 USD with a short position of Vanguard. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard USD and Vanguard.

Diversification Opportunities for Vanguard USD and Vanguard

0.9

Correlation Coefficient

Vanguard USD  Vanguard

Almost no diversification

The 3 months correlation between Vanguard and Vanguard is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard USD Treasury and Vanguard SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard SP 500 and Vanguard USD 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 USD Treasury are associated (or correlated) with Vanguard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard SP 500 has no effect on the direction of Vanguard USD i.e., Vanguard USD and Vanguard go up and down completely randomly.

Pair Corralation between Vanguard USD and Vanguard

Assuming the 90 days trading horizon Vanguard USD is expected to generate 2.02 times less return on investment than Vanguard. But when comparing it to its historical volatility, Vanguard USD Treasury is 2.0 times less risky than Vanguard. It trades about 0.08 of its potential returns per unit of risk. Vanguard SP 500 is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  10,096  in Vanguard SP 500 on September 29, 2024 and sell it today you would earn a total of  92.00  from holding Vanguard SP 500 or generate 0.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.0%
Values	Daily Returns

Vanguard USD Treasury  vs.  Vanguard SP 500

Vanguard USD Treasury

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard USD Treasury are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Vanguard USD is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Vanguard SP 500

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard SP 500 are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Vanguard may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Vanguard USD and Vanguard

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

The idea behind Vanguard USD Treasury and Vanguard SP 500 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.