Correlation Between Vanguard Target and Vanguard Health

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

By analyzing existing cross correlation between Vanguard Target Retirement and Vanguard Health Care, you can compare the effects of market volatilities on Vanguard Target and Vanguard Health 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 Target with a short position of Vanguard Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Target and Vanguard Health.

Diversification Opportunities for Vanguard Target and Vanguard Health

0.82

Correlation Coefficient

Vanguard Target  Vanguard Health

Very poor diversification

The 3 months correlation between Vanguard and Vanguard is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Target Retirement and Vanguard Health Care in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Health Care and Vanguard Target 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 Target Retirement are associated (or correlated) with Vanguard Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Health Care has no effect on the direction of Vanguard Target i.e., Vanguard Target and Vanguard Health go up and down completely randomly.

Pair Corralation between Vanguard Target and Vanguard Health

Assuming the 90 days horizon Vanguard Target is expected to generate 2.97 times less return on investment than Vanguard Health. But when comparing it to its historical volatility, Vanguard Target Retirement is 3.5 times less risky than Vanguard Health. It trades about 0.24 of its potential returns per unit of risk. Vanguard Health Care is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  17,267  in Vanguard Health Care on August 4, 2025 and sell it today you would earn a total of  2,121  from holding Vanguard Health Care or generate 12.28% return on investment over 90 days.

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

Vanguard Target Retirement  vs.  Vanguard Health Care

Vanguard Target Reti

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Target Retirement are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Vanguard Target is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Vanguard Health Care

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Health Care are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Vanguard Health may actually be approaching a critical reversion point that can send shares even higher in December 2025.

Pair Trading with Vanguard Target and Vanguard Health

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

The idea behind Vanguard Target Retirement and Vanguard Health Care 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.