Correlation Between Smead Value and Vanguard Emerging

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

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

Diversification Opportunities for Smead Value and Vanguard Emerging

0.39

Correlation Coefficient

Smead Value  Vanguard Emerging

Weak diversification

The 3 months correlation between Smead and Vanguard is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Smead Value Fund and Vanguard Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Emerging Markets and Smead Value 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 Smead Value Fund are associated (or correlated) with Vanguard Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Emerging Markets has no effect on the direction of Smead Value i.e., Smead Value and Vanguard Emerging go up and down completely randomly.

Pair Corralation between Smead Value and Vanguard Emerging

Assuming the 90 days horizon Smead Value Fund is expected to under-perform the Vanguard Emerging. In addition to that, Smead Value is 1.49 times more volatile than Vanguard Emerging Markets. It trades about -0.07 of its total potential returns per unit of risk. Vanguard Emerging Markets is currently generating about 0.25 per unit of volatility. If you would invest  3,555  in Vanguard Emerging Markets on February 28, 2024 and sell it today you would earn a total of  122.00  from holding Vanguard Emerging Markets or generate 3.43% return on investment over 90 days.

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

Smead Value Fund  vs.  Vanguard Emerging Markets

Smead Value Fund

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Smead Value Fund are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong essential indicators, Smead Value is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Vanguard Emerging Markets

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Emerging Markets are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Vanguard Emerging may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Smead Value and Vanguard Emerging

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

The idea behind Smead Value Fund and Vanguard Emerging Markets 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.