Correlation Between Vanguard Growth and ETF Series

Can any of the company-specific risk be diversified away by investing in both Vanguard Growth and ETF Series 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 Growth and ETF Series into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Vanguard Growth Index and ETF Series Solutions, you can compare the effects of market volatilities on Vanguard Growth and ETF Series 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 Growth with a short position of ETF Series. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Growth and ETF Series.

Diversification Opportunities for Vanguard Growth and ETF Series

-0.12

Correlation Coefficient

Vanguard Growth  ETF Series

Good diversification

The 3 months correlation between Vanguard and ETF is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Growth Index and ETF Series Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETF Series Solutions and Vanguard 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 Vanguard Growth Index are associated (or correlated) with ETF Series. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETF Series Solutions has no effect on the direction of Vanguard Growth i.e., Vanguard Growth and ETF Series go up and down completely randomly.

Pair Corralation between Vanguard Growth and ETF Series

Considering the 90-day investment horizon Vanguard Growth Index is expected to under-perform the ETF Series. In addition to that, Vanguard Growth is 5.39 times more volatile than ETF Series Solutions. It trades about -0.27 of its total potential returns per unit of risk. ETF Series Solutions is currently generating about -0.06 per unit of volatility. If you would invest  2,338  in ETF Series Solutions on January 20, 2024 and sell it today you would lose (5.00) from holding ETF Series Solutions or give up 0.21% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Vanguard Growth Index  vs.  ETF Series Solutions

Vanguard Growth Index

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Growth Index are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Vanguard Growth is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

ETF Series Solutions

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ETF Series Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, ETF Series is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vanguard Growth and ETF Series

The main advantage of trading using opposite Vanguard Growth and ETF Series positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Growth position performs unexpectedly, ETF Series 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 ETF Series will offset losses from the drop in ETF Series' long position.

The idea behind Vanguard Growth Index and ETF Series Solutions 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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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.