Correlation Between Vanguard Total and Wilmington Large-cap

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

By analyzing existing cross correlation between Vanguard Total Bond and Wilmington Large Cap Strategy, you can compare the effects of market volatilities on Vanguard Total and Wilmington Large-cap 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 Wilmington Large-cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Total and Wilmington Large-cap.

Diversification Opportunities for Vanguard Total and Wilmington Large-cap

0.6

Correlation Coefficient

Vanguard Total  Wilmington Large-cap

Poor diversification

The 3 months correlation between Vanguard and Wilmington is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Bond and Wilmington Large Cap Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wilmington Large Cap 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 Bond are associated (or correlated) with Wilmington Large-cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wilmington Large Cap has no effect on the direction of Vanguard Total i.e., Vanguard Total and Wilmington Large-cap go up and down completely randomly.

Pair Corralation between Vanguard Total and Wilmington Large-cap

Assuming the 90 days horizon Vanguard Total is expected to generate 1.61 times less return on investment than Wilmington Large-cap. But when comparing it to its historical volatility, Vanguard Total Bond is 1.47 times less risky than Wilmington Large-cap. It trades about 0.15 of its potential returns per unit of risk. Wilmington Large Cap Strategy is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  2,986  in Wilmington Large Cap Strategy on March 8, 2024 and sell it today you would earn a total of  51.00  from holding Wilmington Large Cap Strategy or generate 1.71% return on investment over 90 days.

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

Vanguard Total Bond  vs.  Wilmington Large Cap Strategy

Vanguard Total Bond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Total Bond has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong essential indicators, Vanguard Total is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Wilmington Large Cap

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Wilmington Large Cap Strategy are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Wilmington Large-cap is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vanguard Total and Wilmington Large-cap

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

The idea behind Vanguard Total Bond and Wilmington Large Cap Strategy 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.

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 Global Correlations module to find global opportunities by holding instruments from different markets.