Correlation Between Vanguard Target and Vanguard Balanced

Can any of the company-specific risk be diversified away by investing in both Vanguard Target 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 Target 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 Target Retirement and Vanguard Balanced Index, you can compare the effects of market volatilities on Vanguard Target 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 Target with a short position of Vanguard Balanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Target and Vanguard Balanced.

Diversification Opportunities for Vanguard Target and Vanguard Balanced

0.99

Correlation Coefficient

Vanguard Target  Vanguard Balanced

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 Target Retirement 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 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 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 Target i.e., Vanguard Target and Vanguard Balanced go up and down completely randomly.

Pair Corralation between Vanguard Target and Vanguard Balanced

Assuming the 90 days horizon Vanguard Target is expected to generate 1.03 times less return on investment than Vanguard Balanced. In addition to that, Vanguard Target is 1.15 times more volatile than Vanguard Balanced Index. It trades about 0.08 of its total potential returns per unit of risk. Vanguard Balanced Index is currently generating about 0.1 per unit of volatility. If you would invest  5,114  in Vanguard Balanced Index on August 26, 2025 and sell it today you would earn a total of  156.00  from holding Vanguard Balanced Index or generate 3.05% return on investment over 90 days.

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

Vanguard Target Retirement  vs.  Vanguard Balanced Index

Vanguard Target Reti

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Target Retirement are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Vanguard Target is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Vanguard Balanced Index

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Balanced Index are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Vanguard Balanced is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vanguard Target and Vanguard Balanced

The main advantage of trading using opposite Vanguard Target and Vanguard Balanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Target 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.

The idea behind Vanguard Target Retirement and Vanguard Balanced Index 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.