Correlation Between Vanguard Total and Investment

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Can any of the company-specific risk be diversified away by investing in both Vanguard Total and Investment 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 Investment 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 Investment Of America, you can compare the effects of market volatilities on Vanguard Total and Investment 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 Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Total and Investment.

Diversification Opportunities for Vanguard Total and Investment

1.0
  Correlation Coefficient

No risk reduction

The 3 months correlation between Vanguard and Investment is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding VANGUARD TOTAL STOCK and INVESTMENT OF AMERICA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investment Of America 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 Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investment Of America has no effect on the direction of Vanguard Total i.e., Vanguard Total and Investment go up and down completely randomly.

Pair Corralation between Vanguard Total and Investment

Assuming the 90 days horizon Vanguard Total is expected to generate 1.09 times less return on investment than Investment. But when comparing it to its historical volatility, Vanguard Total Stock is 1.02 times less risky than Investment. It trades about 0.25 of its potential returns per unit of risk. Investment Of America is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  5,311  in Investment Of America on December 29, 2023 and sell it today you would earn a total of  208.00  from holding Investment Of America or generate 3.92% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

VANGUARD TOTAL STOCK  vs.  INVESTMENT OF AMERICA

 Performance 
       Timeline  
Vanguard Total Stock 

Risk-Adjusted Performance

16 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Total Stock are ranked lower than 16 (%) 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 April 2024.
Investment Of America 

Risk-Adjusted Performance

18 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Investment Of America are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Investment may actually be approaching a critical reversion point that can send shares even higher in April 2024.

Vanguard Total and Investment Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Vanguard Total and Investment

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

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