Correlation Between Vanguard Large and Harbor ETF

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

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

Diversification Opportunities for Vanguard Large and Harbor ETF

0.41

Correlation Coefficient

Vanguard Large  Harbor ETF

Very weak diversification

The 3 months correlation between Vanguard and Harbor is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Large Cap Index and Harbor ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harbor ETF Trust and Vanguard Large 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 Large Cap Index are associated (or correlated) with Harbor ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harbor ETF Trust has no effect on the direction of Vanguard Large i.e., Vanguard Large and Harbor ETF go up and down completely randomly.

Pair Corralation between Vanguard Large and Harbor ETF

Allowing for the 90-day total investment horizon Vanguard Large Cap Index is expected to generate 1.04 times more return on investment than Harbor ETF. However, Vanguard Large is 1.04 times more volatile than Harbor ETF Trust. It trades about 0.14 of its potential returns per unit of risk. Harbor ETF Trust is currently generating about 0.13 per unit of risk. If you would invest  20,607  in Vanguard Large Cap Index on September 28, 2024 and sell it today you would earn a total of  7,094  from holding Vanguard Large Cap Index or generate 34.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	20.15%
Values	Daily Returns

Vanguard Large Cap Index  vs.  Harbor ETF Trust

Vanguard Large Cap

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Large Cap Index are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Vanguard Large is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Harbor ETF Trust

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Harbor ETF Trust are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Harbor ETF is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Vanguard Large and Harbor ETF

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

The idea behind Vanguard Large Cap Index and Harbor ETF Trust 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.