Correlation Between Vanguard Total and Wilmington Broad

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

By analyzing existing cross correlation between Vanguard Total Bond and Wilmington Broad Market, you can compare the effects of market volatilities on Vanguard Total and Wilmington Broad 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 Wilmington Broad. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Total and Wilmington Broad.

Diversification Opportunities for Vanguard Total and Wilmington Broad

1.0

Correlation Coefficient

Vanguard Total  Wilmington Broad

No risk reduction

The 3 months correlation between Vanguard and Wilmington is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Bond and Wilmington Broad Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wilmington Broad Market 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 Bond are associated (or correlated) with Wilmington Broad. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wilmington Broad Market has no effect on the direction of Vanguard Total i.e., Vanguard Total and Wilmington Broad go up and down completely randomly.

Pair Corralation between Vanguard Total and Wilmington Broad

Assuming the 90 days horizon Vanguard Total Bond is expected to under-perform the Wilmington Broad. In addition to that, Vanguard Total is 1.02 times more volatile than Wilmington Broad Market. It trades about -0.12 of its total potential returns per unit of risk. Wilmington Broad Market is currently generating about -0.11 per unit of volatility. If you would invest  896.00  in Wilmington Broad Market on September 13, 2024 and sell it today you would lose (19.00) from holding Wilmington Broad Market or give up 2.12% of portfolio value over 90 days.

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

Vanguard Total Bond  vs.  Wilmington Broad Market

Vanguard Total Bond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Total Bond has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Vanguard Total is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Wilmington Broad Market

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wilmington Broad Market has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong primary indicators, Wilmington Broad 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 Wilmington Broad

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

The idea behind Vanguard Total Bond and Wilmington Broad Market 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.