Correlation Between Vanguard and Vanguard Industrials

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

By analyzing existing cross correlation between Vanguard SP 500 and Vanguard Industrials ETF, you can compare the effects of market volatilities on Vanguard and Vanguard Industrials 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 with a short position of Vanguard Industrials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard and Vanguard Industrials.

Diversification Opportunities for Vanguard and Vanguard Industrials

0.66

Correlation Coefficient

Vanguard  Vanguard Industrials

Poor diversification

The 3 months correlation between Vanguard and Vanguard is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard SP 500 and Vanguard Industrials ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Industrials ETF and Vanguard 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 SP 500 are associated (or correlated) with Vanguard Industrials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Industrials ETF has no effect on the direction of Vanguard i.e., Vanguard and Vanguard Industrials go up and down completely randomly.

Pair Corralation between Vanguard and Vanguard Industrials

Assuming the 90 days trading horizon Vanguard SP 500 is expected to generate 1.1 times more return on investment than Vanguard Industrials. However, Vanguard is 1.1 times more volatile than Vanguard Industrials ETF. It trades about 0.13 of its potential returns per unit of risk. Vanguard Industrials ETF is currently generating about 0.05 per unit of risk. If you would invest  957,779  in Vanguard SP 500 on April 4, 2025 and sell it today you would earn a total of  112,540  from holding Vanguard SP 500 or generate 11.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

Vanguard SP 500  vs.  Vanguard Industrials ETF

Vanguard SP 500

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard SP 500 are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Vanguard may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Vanguard Industrials ETF

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Industrials ETF are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Vanguard Industrials 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 and Vanguard Industrials

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

The idea behind Vanguard SP 500 and Vanguard Industrials ETF 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .