Correlation Between Vanguard Funds and Vanguard Specialized

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

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

Diversification Opportunities for Vanguard Funds and Vanguard Specialized

0.73

Correlation Coefficient

Vanguard Funds  Vanguard Specialized

Poor diversification

The 3 months correlation between Vanguard and Vanguard is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Funds Public and Vanguard Specialized Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Specialized and Vanguard Funds 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 Funds Public are associated (or correlated) with Vanguard Specialized. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Specialized has no effect on the direction of Vanguard Funds i.e., Vanguard Funds and Vanguard Specialized go up and down completely randomly.

Pair Corralation between Vanguard Funds and Vanguard Specialized

Assuming the 90 days trading horizon Vanguard Funds is expected to generate 1.83 times less return on investment than Vanguard Specialized. But when comparing it to its historical volatility, Vanguard Funds Public is 1.27 times less risky than Vanguard Specialized. It trades about 0.09 of its potential returns per unit of risk. Vanguard Specialized Funds is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  186,341  in Vanguard Specialized Funds on August 31, 2024 and sell it today you would earn a total of  16,992  from holding Vanguard Specialized Funds or generate 9.12% return on investment over 90 days.

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

Vanguard Funds Public  vs.  Vanguard Specialized Funds

Vanguard Funds Public

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Funds Public are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, Vanguard Funds is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Vanguard Specialized

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Specialized Funds are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Vanguard Specialized may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Vanguard Funds and Vanguard Specialized

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

The idea behind Vanguard Funds Public and Vanguard Specialized Funds 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.