Correlation Between Vanguard Total and MicroSectors FANG
Can any of the company-specific risk be diversified away by investing in both Vanguard Total and MicroSectors FANG 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 MicroSectors FANG 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 MicroSectors FANG Index, you can compare the effects of market volatilities on Vanguard Total and MicroSectors FANG 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 MicroSectors FANG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Total and MicroSectors FANG.
Diversification Opportunities for Vanguard Total and MicroSectors FANG
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Vanguard and MicroSectors is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Bond and MicroSectors FANG Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MicroSectors FANG Index 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 MicroSectors FANG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MicroSectors FANG Index has no effect on the direction of Vanguard Total i.e., Vanguard Total and MicroSectors FANG go up and down completely randomly.
Pair Corralation between Vanguard Total and MicroSectors FANG
Considering the 90-day investment horizon Vanguard Total is expected to generate 7.83 times less return on investment than MicroSectors FANG. But when comparing it to its historical volatility, Vanguard Total Bond is 7.02 times less risky than MicroSectors FANG. It trades about 0.15 of its potential returns per unit of risk. MicroSectors FANG Index is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 9,424 in MicroSectors FANG Index on May 30, 2025 and sell it today you would earn a total of 1,915 from holding MicroSectors FANG Index or generate 20.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Total Bond vs. MicroSectors FANG Index
Performance |
| Timeline |
| Vanguard Total Bond |
| MicroSectors FANG Index |
Vanguard Total and MicroSectors FANG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Total and MicroSectors FANG
The main advantage of trading using opposite Vanguard Total and MicroSectors FANG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Total position performs unexpectedly, MicroSectors FANG 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 MicroSectors FANG will offset losses from the drop in MicroSectors FANG's long position.| Vanguard Total vs. Vanguard Total International | Vanguard Total vs. Vanguard Total International | Vanguard Total vs. Vanguard Total Stock | Vanguard Total vs. Vanguard Real Estate |
| MicroSectors FANG vs. MicroSectors FANG ETN | MicroSectors FANG vs. Direxion Daily Dow | MicroSectors FANG vs. MicroSectors FANG Index | MicroSectors FANG vs. Direxion Daily Cnsmr |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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