Correlation Between Vanguard Balanced and Vanguard Retirement

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

By analyzing existing cross correlation between Vanguard Balanced Portfolio and Vanguard Retirement Income, you can compare the effects of market volatilities on Vanguard Balanced and Vanguard Retirement 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 Balanced with a short position of Vanguard Retirement. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Balanced and Vanguard Retirement.

Diversification Opportunities for Vanguard Balanced and Vanguard Retirement

0.99

Correlation Coefficient

Vanguard Balanced  Vanguard Retirement

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 Balanced Portfolio and Vanguard Retirement Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Retirement and Vanguard Balanced 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 Balanced Portfolio are associated (or correlated) with Vanguard Retirement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Retirement has no effect on the direction of Vanguard Balanced i.e., Vanguard Balanced and Vanguard Retirement go up and down completely randomly.

Pair Corralation between Vanguard Balanced and Vanguard Retirement

Assuming the 90 days trading horizon Vanguard Balanced Portfolio is expected to generate 1.5 times more return on investment than Vanguard Retirement. However, Vanguard Balanced is 1.5 times more volatile than Vanguard Retirement Income. It trades about 0.33 of its potential returns per unit of risk. Vanguard Retirement Income is currently generating about 0.29 per unit of risk. If you would invest  3,173  in Vanguard Balanced Portfolio on April 22, 2025 and sell it today you would earn a total of  275.00  from holding Vanguard Balanced Portfolio or generate 8.67% return on investment over 90 days.

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

Vanguard Balanced Portfolio  vs.  Vanguard Retirement Income

Vanguard Balanced

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Balanced Portfolio are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Vanguard Balanced may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Vanguard Retirement

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Retirement Income are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Vanguard Retirement is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Vanguard Balanced and Vanguard Retirement

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

The idea behind Vanguard Balanced Portfolio and Vanguard Retirement Income 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.

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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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.