Correlation Between Vanguard Large and Boston Trust

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

By analyzing existing cross correlation between Vanguard Large Cap Index and Boston Trust Smid, you can compare the effects of market volatilities on Vanguard Large and Boston Trust 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 Large with a short position of Boston Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Large and Boston Trust.

Diversification Opportunities for Vanguard Large and Boston Trust

0.91

Correlation Coefficient

Vanguard Large  Boston Trust

Almost no diversification

The 3 months correlation between Vanguard and Boston is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Large Cap Index and Boston Trust Smid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Trust Smid and Vanguard Large 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 Large Cap Index are associated (or correlated) with Boston Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boston Trust Smid has no effect on the direction of Vanguard Large i.e., Vanguard Large and Boston Trust go up and down completely randomly.

Pair Corralation between Vanguard Large and Boston Trust

Assuming the 90 days horizon Vanguard Large is expected to generate 1.06 times less return on investment than Boston Trust. But when comparing it to its historical volatility, Vanguard Large Cap Index is 1.2 times less risky than Boston Trust. It trades about 0.2 of its potential returns per unit of risk. Boston Trust Smid is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  2,471  in Boston Trust Smid on September 12, 2024 and sell it today you would earn a total of  228.00  from holding Boston Trust Smid or generate 9.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

Vanguard Large Cap Index  vs.  Boston Trust Smid

Vanguard Large Cap

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Large Cap Index are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Vanguard Large may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Boston Trust Smid

Risk-Adjusted Performance

13 of 100

Good

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

Pair Trading with Vanguard Large and Boston Trust

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

The idea behind Vanguard Large Cap Index and Boston Trust Smid 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.