Correlation Between Vanguard Target and Morningstar Defensive
Can any of the company-specific risk be diversified away by investing in both Vanguard Target and Morningstar Defensive 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 Target and Morningstar Defensive into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Target Retirement and Morningstar Defensive Bond, you can compare the effects of market volatilities on Vanguard Target and Morningstar Defensive 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 Target with a short position of Morningstar Defensive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Target and Morningstar Defensive.
Diversification Opportunities for Vanguard Target and Morningstar Defensive
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vanguard and Morningstar is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Target Retirement and Morningstar Defensive Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morningstar Defensive and Vanguard Target 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 Target Retirement are associated (or correlated) with Morningstar Defensive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Morningstar Defensive has no effect on the direction of Vanguard Target i.e., Vanguard Target and Morningstar Defensive go up and down completely randomly.
Pair Corralation between Vanguard Target and Morningstar Defensive
Assuming the 90 days horizon Vanguard Target Retirement is expected to generate 6.56 times more return on investment than Morningstar Defensive. However, Vanguard Target is 6.56 times more volatile than Morningstar Defensive Bond. It trades about 0.09 of its potential returns per unit of risk. Morningstar Defensive Bond is currently generating about 0.19 per unit of risk. If you would invest 5,715 in Vanguard Target Retirement on August 28, 2025 and sell it today you would earn a total of 209.00 from holding Vanguard Target Retirement or generate 3.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Target Retirement vs. Morningstar Defensive Bond
Performance |
| Timeline |
| Vanguard Target Reti |
| Morningstar Defensive |
Vanguard Target and Morningstar Defensive Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Target and Morningstar Defensive
The main advantage of trading using opposite Vanguard Target and Morningstar Defensive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Target position performs unexpectedly, Morningstar Defensive 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 Morningstar Defensive will offset losses from the drop in Morningstar Defensive's long position.| Vanguard Target vs. Praxis Genesis Growth | Vanguard Target vs. Templeton Growth Fund | Vanguard Target vs. Tfa Alphagen Growth | Vanguard Target vs. The Hartford Growth |
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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 the Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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