Correlation Between DGA Absolute and Vanguard FTSE

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

By analyzing existing cross correlation between DGA Absolute Return and Vanguard FTSE Emerging, you can compare the effects of market volatilities on DGA Absolute and Vanguard FTSE 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 DGA Absolute with a short position of Vanguard FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of DGA Absolute and Vanguard FTSE.

Diversification Opportunities for DGA Absolute and Vanguard FTSE

0.56

Correlation Coefficient

DGA Absolute  Vanguard FTSE

Very weak diversification

The 3 months correlation between DGA and Vanguard is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding DGA Absolute Return and Vanguard FTSE Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard FTSE Emerging and DGA Absolute 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 DGA Absolute Return are associated (or correlated) with Vanguard FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard FTSE Emerging has no effect on the direction of DGA Absolute i.e., DGA Absolute and Vanguard FTSE go up and down completely randomly.

Pair Corralation between DGA Absolute and Vanguard FTSE

Allowing for the 90-day total investment horizon DGA Absolute is expected to generate 9.23 times less return on investment than Vanguard FTSE. But when comparing it to its historical volatility, DGA Absolute Return is 1.82 times less risky than Vanguard FTSE. It trades about 0.04 of its potential returns per unit of risk. Vanguard FTSE Emerging is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  4,108  in Vanguard FTSE Emerging on February 4, 2024 and sell it today you would earn a total of  255.00  from holding Vanguard FTSE Emerging or generate 6.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	97.73%
Values	Daily Returns

DGA Absolute Return  vs.  Vanguard FTSE Emerging

DGA Absolute Return

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DGA Absolute Return are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, DGA Absolute is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Vanguard FTSE Emerging

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard FTSE Emerging are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Vanguard FTSE may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with DGA Absolute and Vanguard FTSE

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

The idea behind DGA Absolute Return and Vanguard FTSE Emerging 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.