Correlation Between Vanguard Total and NASDAQ-100 INDEX

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Can any of the company-specific risk be diversified away by investing in both Vanguard Total and NASDAQ-100 INDEX 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 NASDAQ-100 INDEX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Total Stock and NASDAQ-100 INDEX FUND, you can compare the effects of market volatilities on Vanguard Total and NASDAQ-100 INDEX 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 NASDAQ-100 INDEX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Total and NASDAQ-100 INDEX.

Diversification Opportunities for Vanguard Total and NASDAQ-100 INDEX

0.91
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Vanguard and NASDAQ-100 is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Stock and NASDAQ-100 INDEX FUND in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NASDAQ-100 INDEX FUND 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 Stock are associated (or correlated) with NASDAQ-100 INDEX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NASDAQ-100 INDEX FUND has no effect on the direction of Vanguard Total i.e., Vanguard Total and NASDAQ-100 INDEX go up and down completely randomly.

Pair Corralation between Vanguard Total and NASDAQ-100 INDEX

Considering the 90-day investment horizon Vanguard Total Stock is expected to generate 0.77 times more return on investment than NASDAQ-100 INDEX. However, Vanguard Total Stock is 1.3 times less risky than NASDAQ-100 INDEX. It trades about -0.02 of its potential returns per unit of risk. NASDAQ-100 INDEX FUND is currently generating about -0.03 per unit of risk. If you would invest  22,637  in Vanguard Total Stock on October 30, 2022 and sell it today you would lose (2,243)  from holding Vanguard Total Stock or give up 9.91% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Vanguard Total Stock  vs.  NASDAQ-100 INDEX FUND

 Performance (%) 
       Timeline  
Vanguard Total Stock 
Vanguard Performance
5 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Total Stock are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Vanguard Total is not utilizing all of its potentials. The new stock price disturbance, may contribute to mid-run losses for the stockholders.

Vanguard Price Channel

NASDAQ-100 INDEX FUND 
NASDAQ-100 Performance
5 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in NASDAQ-100 INDEX FUND are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward-looking signals, NASDAQ-100 INDEX may actually be approaching a critical reversion point that can send shares even higher in February 2023.

NASDAQ-100 Price Channel

Vanguard Total and NASDAQ-100 INDEX Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Vanguard Total and NASDAQ-100 INDEX

The main advantage of trading using opposite Vanguard Total and NASDAQ-100 INDEX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Total position performs unexpectedly, NASDAQ-100 INDEX 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 NASDAQ-100 INDEX will offset losses from the drop in NASDAQ-100 INDEX's long position.
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The idea behind Vanguard Total Stock and NASDAQ-100 INDEX FUND 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 Transaction History module to view history of all your transactions and understand their impact on performance.

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