Correlation Between Vanguard Windsor and Fundamental Large

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

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

Diversification Opportunities for Vanguard Windsor and Fundamental Large

0.96

Correlation Coefficient

Vanguard Windsor  Fundamental Large

Almost no diversification

The 3 months correlation between Vanguard and Fundamental is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Windsor Fund and Fundamental Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fundamental Large Cap and Vanguard Windsor 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 Windsor Fund are associated (or correlated) with Fundamental Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fundamental Large Cap has no effect on the direction of Vanguard Windsor i.e., Vanguard Windsor and Fundamental Large go up and down completely randomly.

Pair Corralation between Vanguard Windsor and Fundamental Large

Assuming the 90 days horizon Vanguard Windsor Fund is expected to under-perform the Fundamental Large. But the mutual fund apears to be less risky and, when comparing its historical volatility, Vanguard Windsor Fund is 1.05 times less risky than Fundamental Large. The mutual fund trades about -0.07 of its potential returns per unit of risk. The Fundamental Large Cap is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  8,210  in Fundamental Large Cap on September 12, 2024 and sell it today you would earn a total of  101.00  from holding Fundamental Large Cap or generate 1.23% return on investment over 90 days.

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

Vanguard Windsor Fund  vs.  Fundamental Large Cap

Vanguard Windsor

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Windsor Fund are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Vanguard Windsor is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fundamental Large Cap

Risk-Adjusted Performance

15 of 100

Good

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

Pair Trading with Vanguard Windsor and Fundamental Large

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

The idea behind Vanguard Windsor Fund and Fundamental Large Cap 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.