Correlation Between Vanguard Value and Vanguard Total

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

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

Diversification Opportunities for Vanguard Value and Vanguard Total

-0.54

Correlation Coefficient

Vanguard Value  Vanguard Total

Excellent diversification

The 3 months correlation between Vanguard and Vanguard is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Value Index and Vanguard Total Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Total Bond and Vanguard Value 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 Value Index are associated (or correlated) with Vanguard Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Total Bond has no effect on the direction of Vanguard Value i.e., Vanguard Value and Vanguard Total go up and down completely randomly.

Pair Corralation between Vanguard Value and Vanguard Total

Considering the 90-day investment horizon Vanguard Value Index is expected to generate 2.03 times more return on investment than Vanguard Total. However, Vanguard Value is 2.03 times more volatile than Vanguard Total Bond. It trades about 0.1 of its potential returns per unit of risk. Vanguard Total Bond is currently generating about -0.08 per unit of risk. If you would invest  16,931  in Vanguard Value Index on September 12, 2024 and sell it today you would earn a total of  673.00  from holding Vanguard Value Index or generate 3.97% return on investment over 90 days.

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

Vanguard Value Index  vs.  Vanguard Total Bond

Vanguard Value Index

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Value Index are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Vanguard Value is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

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 investors with long positions. In spite of rather sound basic indicators, Vanguard Total is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Vanguard Value and Vanguard Total

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

The idea behind Vanguard Value Index and Vanguard Total Bond 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.