Correlation Between Vanguard Balanced and Vanguard All

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

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

Diversification Opportunities for Vanguard Balanced and Vanguard All

0.99

Correlation Coefficient

Vanguard Balanced  Vanguard All

No risk reduction

The 3 months correlation between Vanguard and Vanguard is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Balanced Portfolio and Vanguard All Equity ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard All Equity and Vanguard Balanced 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 Balanced Portfolio are associated (or correlated) with Vanguard All. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard All Equity has no effect on the direction of Vanguard Balanced i.e., Vanguard Balanced and Vanguard All go up and down completely randomly.

Pair Corralation between Vanguard Balanced and Vanguard All

Assuming the 90 days trading horizon Vanguard Balanced is expected to generate 1.55 times less return on investment than Vanguard All. But when comparing it to its historical volatility, Vanguard Balanced Portfolio is 1.61 times less risky than Vanguard All. It trades about 0.3 of its potential returns per unit of risk. Vanguard All Equity ETF is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  4,212  in Vanguard All Equity ETF on August 31, 2024 and sell it today you would earn a total of  425.00  from holding Vanguard All Equity ETF or generate 10.09% return on investment over 90 days.

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

Vanguard Balanced Portfolio  vs.  Vanguard All Equity ETF

Vanguard Balanced

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Balanced Portfolio are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Vanguard Balanced may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Vanguard All Equity

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard All Equity ETF are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Vanguard All may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Vanguard Balanced and Vanguard All

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

The idea behind Vanguard Balanced Portfolio and Vanguard All Equity ETF 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .