Correlation Between Vanguard Total and Multifactor Equity
Can any of the company-specific risk be diversified away by investing in both Vanguard Total and Multifactor Equity 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 Multifactor Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Total Stock and Multifactor Equity Fund, you can compare the effects of market volatilities on Vanguard Total and Multifactor Equity 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 Multifactor Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Total and Multifactor Equity.
Diversification Opportunities for Vanguard Total and Multifactor Equity
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Vanguard and Multifactor is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Stock and Multifactor Equity Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multifactor Equity 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 Stock are associated (or correlated) with Multifactor Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Multifactor Equity has no effect on the direction of Vanguard Total i.e., Vanguard Total and Multifactor Equity go up and down completely randomly.
Pair Corralation between Vanguard Total and Multifactor Equity
Assuming the 90 days horizon Vanguard Total is expected to generate 1.02 times less return on investment than Multifactor Equity. But when comparing it to its historical volatility, Vanguard Total Stock is 1.0 times less risky than Multifactor Equity. It trades about 0.05 of its potential returns per unit of risk. Multifactor Equity Fund is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,528 in Multifactor Equity Fund on May 27, 2025 and sell it today you would earn a total of 136.00 from holding Multifactor Equity Fund or generate 8.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.21% |
| Values | Daily Returns |
Vanguard Total Stock vs. Multifactor Equity Fund
Performance |
| Timeline |
| Vanguard Total Stock |
| Multifactor Equity |
Vanguard Total and Multifactor Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Total and Multifactor Equity
The main advantage of trading using opposite Vanguard Total and Multifactor Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Total position performs unexpectedly, Multifactor Equity 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 Multifactor Equity will offset losses from the drop in Multifactor Equity's long position.| Vanguard Total vs. Vanguard Total International | Vanguard Total vs. Vanguard Total Bond | Vanguard Total vs. Vanguard Small Cap Index | Vanguard Total vs. Vanguard Reit Index |
| Multifactor Equity vs. Virtus Convertible | Multifactor Equity vs. Advent Claymore Convertible | Multifactor Equity vs. The Gamco Global | Multifactor Equity vs. Allianzgi Convertible 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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