Correlation Between Vanguard Windsor and Wasatch Ultra

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

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

Diversification Opportunities for Vanguard Windsor and Wasatch Ultra

0.21

Correlation Coefficient

Vanguard Windsor  Wasatch Ultra

Modest diversification

The 3 months correlation between Vanguard and Wasatch is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Windsor Fund and Wasatch Ultra Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wasatch Ultra Growth and Vanguard Windsor 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 Windsor Fund are associated (or correlated) with Wasatch Ultra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wasatch Ultra Growth has no effect on the direction of Vanguard Windsor i.e., Vanguard Windsor and Wasatch Ultra go up and down completely randomly.

Pair Corralation between Vanguard Windsor and Wasatch Ultra

Assuming the 90 days horizon Vanguard Windsor Fund is expected to generate 1.39 times more return on investment than Wasatch Ultra. However, Vanguard Windsor is 1.39 times more volatile than Wasatch Ultra Growth. It trades about -0.12 of its potential returns per unit of risk. Wasatch Ultra Growth is currently generating about -0.18 per unit of risk. If you would invest  2,463  in Vanguard Windsor Fund on December 1, 2024 and sell it today you would lose (303.00) from holding Vanguard Windsor Fund or give up 12.3% of portfolio value over 90 days.

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

Vanguard Windsor Fund  vs.  Wasatch Ultra Growth

Vanguard Windsor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Windsor Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Wasatch Ultra Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Wasatch Ultra Growth has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Vanguard Windsor and Wasatch Ultra

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

The idea behind Vanguard Windsor Fund and Wasatch Ultra Growth 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.