Correlation Between VANGUARD 500 and GROWTH FUND

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Can any of the company-specific risk be diversified away by investing in both VANGUARD 500 and GROWTH FUND 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 500 and GROWTH FUND into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between VANGUARD 500 INDEX and GROWTH FUND OF, you can compare the effects of market volatilities on VANGUARD 500 and GROWTH FUND 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 500 with a short position of GROWTH FUND. Check out your portfolio center. Please also check ongoing floating volatility patterns of VANGUARD 500 and GROWTH FUND.

Diversification Opportunities for VANGUARD 500 and GROWTH FUND

0.87
  Correlation Coefficient

Very poor diversification

The 3 months correlation between VANGUARD and GROWTH is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding VANGUARD 500 INDEX and GROWTH FUND OF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GROWTH FUND and VANGUARD 500 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 500 INDEX are associated (or correlated) with GROWTH FUND. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GROWTH FUND has no effect on the direction of VANGUARD 500 i.e., VANGUARD 500 and GROWTH FUND go up and down completely randomly.

Pair Corralation between VANGUARD 500 and GROWTH FUND

Assuming the 90 days horizon VANGUARD 500 is expected to generate 1.01 times less return on investment than GROWTH FUND. But when comparing it to its historical volatility, VANGUARD 500 INDEX is 1.17 times less risky than GROWTH FUND. It trades about 0.18 of its potential returns per unit of risk. GROWTH FUND OF is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  4,465  in GROWTH FUND OF on September 10, 2022 and sell it today you would earn a total of  264.00  from holding GROWTH FUND OF or generate 5.91% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

VANGUARD 500 INDEX  vs.  GROWTH FUND OF

 Performance (%) 
       Timeline  
VANGUARD 500 INDEX 
VANGUARD Performance
0 of 100
Over the last 90 days VANGUARD 500 INDEX has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, VANGUARD 500 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

VANGUARD Price Channel

GROWTH FUND 
GROWTH Performance
0 of 100
Over the last 90 days GROWTH FUND OF has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest uncertain performance, the Fund's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

GROWTH Price Channel

VANGUARD 500 and GROWTH FUND Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with VANGUARD 500 and GROWTH FUND

The main advantage of trading using opposite VANGUARD 500 and GROWTH FUND positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VANGUARD 500 position performs unexpectedly, GROWTH FUND 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 GROWTH FUND will offset losses from the drop in GROWTH FUND's long position.
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The idea behind VANGUARD 500 INDEX and GROWTH FUND OF 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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Check out your portfolio center. 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 Watchlist Optimization module to optimize watchlists to build efficient portfolio or rebalance existing positions based on mean-variance optimization algorithm.

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