Correlation Between Income Fund and Vanguard Lifestrategy
Can any of the company-specific risk be diversified away by investing in both Income Fund and Vanguard Lifestrategy 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 Income Fund and Vanguard Lifestrategy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Income Fund Of and Vanguard Lifestrategy Growth, you can compare the effects of market volatilities on Income Fund and Vanguard Lifestrategy 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 Income Fund with a short position of Vanguard Lifestrategy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Income Fund and Vanguard Lifestrategy.
Diversification Opportunities for Income Fund and Vanguard Lifestrategy
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Income and Vanguard is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Income Fund Of and Vanguard Lifestrategy Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Lifestrategy and Income Fund 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 Income Fund Of are associated (or correlated) with Vanguard Lifestrategy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Lifestrategy has no effect on the direction of Income Fund i.e., Income Fund and Vanguard Lifestrategy go up and down completely randomly.
Pair Corralation between Income Fund and Vanguard Lifestrategy
Assuming the 90 days horizon Income Fund Of is expected to generate 0.97 times more return on investment than Vanguard Lifestrategy. However, Income Fund Of is 1.03 times less risky than Vanguard Lifestrategy. It trades about -0.24 of its potential returns per unit of risk. Vanguard Lifestrategy Growth is currently generating about -0.33 per unit of risk. If you would invest 2,404 in Income Fund Of on January 20, 2024 and sell it today you would lose (61.00) from holding Income Fund Of or give up 2.54% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Income Fund Of vs. Vanguard Lifestrategy Growth
Performance |
| Timeline |
| Income Fund |
| Vanguard Lifestrategy |
Income Fund and Vanguard Lifestrategy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Income Fund and Vanguard Lifestrategy
The main advantage of trading using opposite Income Fund and Vanguard Lifestrategy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Income Fund position performs unexpectedly, Vanguard Lifestrategy 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 Vanguard Lifestrategy will offset losses from the drop in Vanguard Lifestrategy's long position.| Income Fund vs. New World Fund | Income Fund vs. American Mutual Fund | Income Fund vs. American Mutual Fund | Income Fund vs. American Funds Income |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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