Correlation Between Vanguard Wellington and Vanguard Capital

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

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

Diversification Opportunities for Vanguard Wellington and Vanguard Capital

0.86

Correlation Coefficient

Vanguard Wellington  Vanguard Capital

Very poor diversification

The 3 months correlation between Vanguard and Vanguard is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Wellington Fund and Vanguard Capital Opportunity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Capital Opp and Vanguard Wellington 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 Wellington Fund are associated (or correlated) with Vanguard Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Capital Opp has no effect on the direction of Vanguard Wellington i.e., Vanguard Wellington and Vanguard Capital go up and down completely randomly.

Pair Corralation between Vanguard Wellington and Vanguard Capital

Assuming the 90 days horizon Vanguard Wellington Fund is expected to under-perform the Vanguard Capital. But the mutual fund apears to be less risky and, when comparing its historical volatility, Vanguard Wellington Fund is 1.46 times less risky than Vanguard Capital. The mutual fund trades about -0.15 of its potential returns per unit of risk. The Vanguard Capital Opportunity is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  19,716  in Vanguard Capital Opportunity on October 12, 2024 and sell it today you would lose (376.00) from holding Vanguard Capital Opportunity or give up 1.91% of portfolio value over 90 days.

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

Vanguard Wellington Fund  vs.  Vanguard Capital Opportunity

Vanguard Wellington

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Wellington Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Vanguard Wellington is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Vanguard Capital Opp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Capital Opportunity has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Vanguard Capital is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vanguard Wellington and Vanguard Capital

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

The idea behind Vanguard Wellington Fund and Vanguard Capital Opportunity 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..