Correlation Between Vanguard Total and Predex Funds

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

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

Diversification Opportunities for Vanguard Total and Predex Funds

0.0

Correlation Coefficient

Vanguard Total  Predex Funds

Pay attention - limited upside

The 3 months correlation between Vanguard and Predex is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Stock and Predex Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Predex Funds and Vanguard Total 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 Total Stock are associated (or correlated) with Predex Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Predex Funds has no effect on the direction of Vanguard Total i.e., Vanguard Total and Predex Funds go up and down completely randomly.

Pair Corralation between Vanguard Total and Predex Funds

Assuming the 90 days horizon Vanguard Total Stock is expected to generate 2.06 times more return on investment than Predex Funds. However, Vanguard Total is 2.06 times more volatile than Predex Funds. It trades about 0.12 of its potential returns per unit of risk. Predex Funds is currently generating about -0.09 per unit of risk. If you would invest  9,097  in Vanguard Total Stock on September 19, 2024 and sell it today you would earn a total of  5,564  from holding Vanguard Total Stock or generate 61.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.39%
Values	Daily Returns

Vanguard Total Stock  vs.  Predex Funds

Vanguard Total Stock

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Total Stock are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Vanguard Total may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Predex Funds

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Predex Funds has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Predex Funds 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 Total and Predex Funds

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

The idea behind Vanguard Total Stock and Predex 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.