Correlation Between Vanguard Information and Health Care
Can any of the company-specific risk be diversified away by investing in both Vanguard Information 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 Information 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 Information Technology and Health Care Select, you can compare the effects of market volatilities on Vanguard Information 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 Information with a short position of Health Care. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Information and Health Care.
Diversification Opportunities for Vanguard Information and Health Care
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vanguard and Health is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Information Technolog 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 Information 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 Information Technology 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 Information i.e., Vanguard Information and Health Care go up and down completely randomly.
Pair Corralation between Vanguard Information and Health Care
Considering the 90-day investment horizon Vanguard Information Technology is expected to under-perform the Health Care. In addition to that, Vanguard Information is 1.79 times more volatile than Health Care Select. It trades about -0.02 of its total potential returns per unit of risk. Health Care Select is currently generating about -0.02 per unit of volatility. If you would invest 13,957 in Health Care Select on January 20, 2024 and sell it today you would lose (114.00) from holding Health Care Select or give up 0.82% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Information Technolog vs. Health Care Select
Performance |
| Timeline |
| Vanguard Information |
| Health Care Select |
Vanguard Information and Health Care Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Information and Health Care
The main advantage of trading using opposite Vanguard Information and Health Care positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Information 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 Information vs. ARK Genomic Revolution | Vanguard Information vs. ARK Innovation ETF | Vanguard Information vs. ARK Space Exploration |
| Health Care vs. Consumer Staples Select | Health Care vs. Industrial Select Sector | Health Care vs. Consumer Discretionary Select | Health Care vs. Utilities Select Sector |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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