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Pair CorrelationComparison
Can any of the company-specific risk be diversified away by investing in both Vanguard 500 and LPL Financial 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 500 and LPL Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard 500 Index and LPL Financial Holdings, you can compare the effects of market volatilities on Vanguard 500 and LPL Financial 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 500 with a short position of LPL Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard 500 and LPL Financial.
Diversification Opportunities for Vanguard 500 and LPL Financial
0.38 | Correlation Coefficient | Vanguard 500 LPL Financial |
Weak diversification
The 3 months correlation between Vanguard and LPL is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard 500 Index and LPL Financial Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LPL Financial Holdings and Vanguard 500 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 500 Index are associated (or correlated) with LPL Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LPL Financial Holdings has no effect on the direction of Vanguard 500 i.e., Vanguard 500 and LPL Financial go up and down completely randomly.
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Pair Corralation between Vanguard 500 and LPL Financial
Assuming the 90 days horizon Vanguard 500 Index is expected to generate 0.62 times more return on investment than LPL Financial. However, Vanguard 500 Index is 1.61 times less risky than LPL Financial. It trades about 0.39 of its potential returns per unit of risk. LPL Financial Holdings is currently generating about 0.14 per unit of risk. If you would invest 46,268 in Vanguard 500 Index on February 22, 2024 and sell it today you would earn a total of 2,798 from holding Vanguard 500 Index or generate 6.05% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Vanguard 500 Indexvs.LPL Financial Holdings
Performance
Timeline |
Vanguard 500 Index | Correlation | Profile |
Risk-Adjusted Performance
8 of 100
Weak | Strong |
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard 500 Index are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Vanguard 500 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
...more
Performance | Backtest | Predict |
LPL Financial Holdings | Correlation | Profile |
Risk-Adjusted Performance
4 of 100
Weak | Strong |
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in LPL Financial Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong essential indicators, LPL Financial is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.
...more
Performance | Backtest | Predict |
Vanguard 500 and LPL Financial Volatility Contrast
Predicted Return Density
Returns |
Pair Trading with Vanguard 500 and LPL Financial
The main advantage of trading using opposite Vanguard 500 and LPL Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard 500 position performs unexpectedly, LPL Financial 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 LPL Financial will offset losses from the drop in LPL Financial's long position.
Vanguard 500 vs. Vanguard Total Stock | Vanguard 500 vs. Vanguard 500 Index | Vanguard 500 vs. Vanguard Total Stock | Vanguard 500 vs. Vanguard Total Stock |
The idea behind Vanguard 500 Index and LPL Financial Holdings 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.
LPL Financial vs. Riot Blockchain | LPL Financial vs. Marathon Digital Holdings | LPL Financial vs. Hut 8 Corp | LPL Financial vs. CleanSpark |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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