Correlation Between Vanguard Extended and Thornburg Value

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

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

Diversification Opportunities for Vanguard Extended and Thornburg Value

0.92

Correlation Coefficient

Vanguard Extended  Thornburg Value

Almost no diversification

The 3 months correlation between Vanguard and Thornburg is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Extended Market and Thornburg Value Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thornburg Value and Vanguard Extended 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 Extended Market are associated (or correlated) with Thornburg Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thornburg Value has no effect on the direction of Vanguard Extended i.e., Vanguard Extended and Thornburg Value go up and down completely randomly.

Pair Corralation between Vanguard Extended and Thornburg Value

Assuming the 90 days horizon Vanguard Extended Market is expected to generate 1.11 times more return on investment than Thornburg Value. However, Vanguard Extended is 1.11 times more volatile than Thornburg Value Fund. It trades about -0.04 of its potential returns per unit of risk. Thornburg Value Fund is currently generating about -0.09 per unit of risk. If you would invest  31,865  in Vanguard Extended Market on February 4, 2024 and sell it today you would lose (322.00) from holding Vanguard Extended Market or give up 1.01% of portfolio value over 90 days.

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

Vanguard Extended Market  vs.  Thornburg Value Fund

Vanguard Extended Market

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Extended Market are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Vanguard Extended is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Thornburg Value

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Thornburg Value Fund are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Thornburg Value may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Vanguard Extended and Thornburg Value

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

The idea behind Vanguard Extended Market and Thornburg Value Fund 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.