Correlation Between Vanguard Value and New Economy
Can any of the company-specific risk be diversified away by investing in both Vanguard Value and New Economy 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 Value and New Economy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Value Index and New Economy Fund, you can compare the effects of market volatilities on Vanguard Value and New Economy 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 Value with a short position of New Economy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Value and New Economy.
Diversification Opportunities for Vanguard Value and New Economy
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Vanguard and New is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Value Index and New Economy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Economy Fund and Vanguard Value 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 Value Index are associated (or correlated) with New Economy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Economy Fund has no effect on the direction of Vanguard Value i.e., Vanguard Value and New Economy go up and down completely randomly.
Pair Corralation between Vanguard Value and New Economy
Assuming the 90 days horizon Vanguard Value Index is expected to generate 0.57 times more return on investment than New Economy. However, Vanguard Value Index is 1.77 times less risky than New Economy. It trades about 0.07 of its potential returns per unit of risk. New Economy Fund is currently generating about 0.01 per unit of risk. If you would invest 6,166 in Vanguard Value Index on December 5, 2024 and sell it today you would earn a total of 718.00 from holding Vanguard Value Index or generate 11.64% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Vanguard Value Index vs. New Economy Fund
Performance |
Timeline |
Vanguard Value Index |
New Economy Fund |
Vanguard Value and New Economy Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Vanguard Value and New Economy
The main advantage of trading using opposite Vanguard Value and New Economy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Value position performs unexpectedly, New Economy 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 New Economy will offset losses from the drop in New Economy's long position.Vanguard Value vs. Vanguard Small Cap Value | Vanguard Value vs. Vanguard Growth Index | Vanguard Value vs. Vanguard Mid Cap Value | Vanguard Value vs. Vanguard Small Cap Index |
New Economy vs. Flexible Bond Portfolio | New Economy vs. Doubleline Total Return | New Economy vs. Praxis Impact Bond | New Economy vs. Jhvit Core Bond |
Check out your portfolio center.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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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