Correlation Between Vanguard Extended and Vanguard Balanced
Can any of the company-specific risk be diversified away by investing in both Vanguard Extended and Vanguard Balanced 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 Extended and Vanguard Balanced into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Extended Market and Vanguard Balanced Index, you can compare the effects of market volatilities on Vanguard Extended and Vanguard Balanced 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 Extended with a short position of Vanguard Balanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Extended and Vanguard Balanced.
Diversification Opportunities for Vanguard Extended and Vanguard Balanced
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Vanguard and Vanguard is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Extended Market and Vanguard Balanced Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Balanced Index and Vanguard Extended 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 Extended Market are associated (or correlated) with Vanguard Balanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Balanced Index has no effect on the direction of Vanguard Extended i.e., Vanguard Extended and Vanguard Balanced go up and down completely randomly.
Pair Corralation between Vanguard Extended and Vanguard Balanced
Assuming the 90 days horizon Vanguard Extended Market is expected to generate 2.03 times more return on investment than Vanguard Balanced. However, Vanguard Extended is 2.03 times more volatile than Vanguard Balanced Index. It trades about 0.26 of its potential returns per unit of risk. Vanguard Balanced Index is currently generating about 0.32 per unit of risk. If you would invest 20,129 in Vanguard Extended Market on April 23, 2025 and sell it today you would earn a total of 3,591 from holding Vanguard Extended Market or generate 17.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Extended Market vs. Vanguard Balanced Index
Performance |
| Timeline |
| Vanguard Extended Market |
| Vanguard Balanced Index |
Vanguard Extended and Vanguard Balanced Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Extended and Vanguard Balanced
The main advantage of trading using opposite Vanguard Extended and Vanguard Balanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Extended position performs unexpectedly, Vanguard Balanced 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 Balanced will offset losses from the drop in Vanguard Balanced's long position.| Vanguard Extended vs. Nuveen Short Term | Vanguard Extended vs. Ab Select Longshort | Vanguard Extended vs. The Short Term Municipal | Vanguard Extended vs. Leader Short Term Bond |
| Vanguard Balanced vs. Vanguard Wellesley Income | Vanguard Balanced vs. Vanguard Total Bond | Vanguard Balanced vs. Vanguard Growth Index | Vanguard Balanced vs. Vanguard Wellington Fund |
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.
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