Correlation Between Vanguard Total and VictoryShares USAA

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

Diversification Opportunities for Vanguard Total and VictoryShares USAA

0.99

Correlation Coefficient

Vanguard Total  VictoryShares USAA

No risk reduction

The 3 months correlation between Vanguard and VictoryShares is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Bond and VictoryShares USAA Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VictoryShares USAA Core 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 VictoryShares USAA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VictoryShares USAA Core has no effect on the direction of Vanguard Total i.e., Vanguard Total and VictoryShares USAA go up and down completely randomly.

Pair Corralation between Vanguard Total and VictoryShares USAA

Considering the 90-day investment horizon Vanguard Total Bond is expected to under-perform the VictoryShares USAA. But the etf apears to be less risky and, when comparing its historical volatility, Vanguard Total Bond is 1.0 times less risky than VictoryShares USAA. The etf trades about -0.21 of its potential returns per unit of risk. The VictoryShares USAA Core is currently generating about -0.2 of returns per unit of risk over similar time horizon. If you would invest  4,594  in VictoryShares USAA Core on January 29, 2024 and sell it today you would lose (73.00) from holding VictoryShares USAA Core or give up 1.59% 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.  VictoryShares USAA Core

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 current stock price tumult, may contribute to shorter-term losses for the shareholders.

VictoryShares USAA Core

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VictoryShares USAA Core has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, VictoryShares USAA 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 VictoryShares USAA

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

The idea behind Vanguard Total Bond and VictoryShares USAA Core 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.