Correlation Between Vanguard Total and Health Care
Can any of the company-specific risk be diversified away by investing in both Vanguard Total and Health Care 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 Health Care into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Total Bond and Health Care Select, you can compare the effects of market volatilities on Vanguard Total and Health Care 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 Health Care. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Total and Health Care.
Diversification Opportunities for Vanguard Total and Health Care
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Vanguard and Health is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Bond and Health Care Select in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Health Care Select 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 Bond are associated (or correlated) with Health Care. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Health Care Select has no effect on the direction of Vanguard Total i.e., Vanguard Total and Health Care go up and down completely randomly.
Pair Corralation between Vanguard Total and Health Care
Considering the 90-day investment horizon Vanguard Total is expected to generate 9.27 times less return on investment than Health Care. But when comparing it to its historical volatility, Vanguard Total Bond is 1.57 times less risky than Health Care. It trades about 0.01 of its potential returns per unit of risk. Health Care Select is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 12,879 in Health Care Select on December 29, 2023 and sell it today you would earn a total of 1,892 from holding Health Care Select or generate 14.69% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Vanguard Total Bond vs. Health Care Select
Performance |
Timeline |
Vanguard Total Bond |
Health Care Select |
Vanguard Total and Health Care Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Vanguard Total and Health Care
The main advantage of trading using opposite Vanguard Total and Health Care positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Total position performs unexpectedly, Health Care 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 Health Care will offset losses from the drop in Health Care's long position.Vanguard Total vs. The Coca Cola | Vanguard Total vs. Barloworld Ltd ADR | Vanguard Total vs. Morningstar Unconstrained Allocation | Vanguard Total vs. High Yield Municipal Fund |
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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 the Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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