Correlation Between Vanguard Total and Applied Finance

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

By analyzing existing cross correlation between Vanguard Total International and Applied Finance Core, you can compare the effects of market volatilities on Vanguard Total and Applied Finance 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 Applied Finance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Total and Applied Finance.

Diversification Opportunities for Vanguard Total and Applied Finance

0.5

Correlation Coefficient

Vanguard Total  Applied Finance

Very weak diversification

The 3 months correlation between Vanguard and Applied is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total International and Applied Finance Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Finance 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 International are associated (or correlated) with Applied Finance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Finance Core has no effect on the direction of Vanguard Total i.e., Vanguard Total and Applied Finance go up and down completely randomly.

Pair Corralation between Vanguard Total and Applied Finance

Assuming the 90 days horizon Vanguard Total is expected to generate 1.01 times less return on investment than Applied Finance. But when comparing it to its historical volatility, Vanguard Total International is 1.38 times less risky than Applied Finance. It trades about 0.3 of its potential returns per unit of risk. Applied Finance Core is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  1,071  in Applied Finance Core on April 25, 2025 and sell it today you would earn a total of  117.00  from holding Applied Finance Core or generate 10.92% return on investment over 90 days.

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

Vanguard Total International  vs.  Applied Finance Core

Vanguard Total Inter

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Total International are ranked lower than 23 (%) 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 August 2025.

Applied Finance Core

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Applied Finance Core are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak essential indicators, Applied Finance may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Vanguard Total and Applied Finance

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

The idea behind Vanguard Total International and Applied Finance 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.