Correlation Between Income Growth and Vanguard Value
Can any of the company-specific risk be diversified away by investing in both Income Growth and Vanguard 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 Income Growth and Vanguard Value into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Income Growth Fund and Vanguard Value Index, you can compare the effects of market volatilities on Income Growth and Vanguard 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 Income Growth with a short position of Vanguard Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of Income Growth and Vanguard Value.
Diversification Opportunities for Income Growth and Vanguard Value
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Income and Vanguard is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Income Growth Fund and Vanguard Value Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Value Index and Income Growth 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 Income Growth Fund are associated (or correlated) with Vanguard Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Value Index has no effect on the direction of Income Growth i.e., Income Growth and Vanguard Value go up and down completely randomly.
Pair Corralation between Income Growth and Vanguard Value
Assuming the 90 days horizon Income Growth Fund is expected to generate 1.04 times more return on investment than Vanguard Value. However, Income Growth is 1.04 times more volatile than Vanguard Value Index. It trades about -0.28 of its potential returns per unit of risk. Vanguard Value Index is currently generating about -0.29 per unit of risk. If you would invest 3,555 in Income Growth Fund on January 20, 2024 and sell it today you would lose (145.00) from holding Income Growth Fund or give up 4.08% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Income Growth Fund vs. Vanguard Value Index
Performance |
| Timeline |
| Income Growth |
| Vanguard Value Index |
Income Growth and Vanguard Value Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Income Growth and Vanguard Value
The main advantage of trading using opposite Income Growth and Vanguard Value positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Income Growth position performs unexpectedly, Vanguard 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 Vanguard Value will offset losses from the drop in Vanguard Value's long position.| Income Growth vs. Mid Cap Value | Income Growth vs. Diversified Bond Fund | Income Growth vs. Short Term Government Fund | Income Growth vs. Select Fund A |
| Vanguard Value vs. Vanguard Small Cap Value | Vanguard Value vs. Vanguard Growth Index | Vanguard Value vs. Vanguard Mid Cap Value | Vanguard Value vs. Vanguard Small Cap Index |
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 the Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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