Correlation Between Vanguard Value and Capital World
Can any of the company-specific risk be diversified away by investing in both Vanguard Value and Capital World 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 Value and Capital World into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Value Index and Capital World Growth, you can compare the effects of market volatilities on Vanguard Value and Capital World 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 Value with a short position of Capital World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Value and Capital World.
Diversification Opportunities for Vanguard Value and Capital World
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vanguard and Capital is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Value Index and Capital World Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital World Growth and Vanguard Value 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 Value Index are associated (or correlated) with Capital World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital World Growth has no effect on the direction of Vanguard Value i.e., Vanguard Value and Capital World go up and down completely randomly.
Pair Corralation between Vanguard Value and Capital World
Considering the 90-day investment horizon Vanguard Value Index is expected to generate 0.96 times more return on investment than Capital World. However, Vanguard Value Index is 1.04 times less risky than Capital World. It trades about -0.07 of its potential returns per unit of risk. Capital World Growth is currently generating about -0.12 per unit of risk. If you would invest 16,008 in Vanguard Value Index on January 26, 2024 and sell it today you would lose (184.00) from holding Vanguard Value Index or give up 1.15% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 95.45% |
Values | Daily Returns |
Vanguard Value Index vs. Capital World Growth
Performance |
Timeline |
Vanguard Value Index |
Capital World Growth |
Vanguard Value and Capital World Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Vanguard Value and Capital World
The main advantage of trading using opposite Vanguard Value and Capital World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Value position performs unexpectedly, Capital World 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 Capital World will offset losses from the drop in Capital World's long position.Vanguard Value vs. Hartford Multifactor Emerging | Vanguard Value vs. Hartford Multifactor Developed | Vanguard Value vs. iShares Equity Factor | Vanguard Value vs. SPDR MSCI USA |
Capital World vs. American Funds Capital | Capital World vs. American Funds Capital | Capital World vs. Capital World Growth | Capital World vs. Capital World Growth |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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