Correlation Between Vanguard Extended and Timothy Large/mid-cap

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

By analyzing existing cross correlation between Vanguard Extended Market and Timothy Largemid Cap Value, you can compare the effects of market volatilities on Vanguard Extended and Timothy Large/mid-cap 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 Extended with a short position of Timothy Large/mid-cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Extended and Timothy Large/mid-cap.

Diversification Opportunities for Vanguard Extended and Timothy Large/mid-cap

0.92

Correlation Coefficient

Vanguard Extended  Timothy Large/mid-cap

Almost no diversification

The 3 months correlation between Vanguard and Timothy is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Extended Market and Timothy Largemid Cap Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Timothy Large/mid-cap and Vanguard Extended 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 Extended Market are associated (or correlated) with Timothy Large/mid-cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Timothy Large/mid-cap has no effect on the direction of Vanguard Extended i.e., Vanguard Extended and Timothy Large/mid-cap go up and down completely randomly.

Pair Corralation between Vanguard Extended and Timothy Large/mid-cap

Assuming the 90 days horizon Vanguard Extended is expected to generate 1.08 times less return on investment than Timothy Large/mid-cap. In addition to that, Vanguard Extended is 1.48 times more volatile than Timothy Largemid Cap Value. It trades about 0.06 of its total potential returns per unit of risk. Timothy Largemid Cap Value is currently generating about 0.09 per unit of volatility. If you would invest  2,138  in Timothy Largemid Cap Value on March 5, 2024 and sell it today you would earn a total of  300.00  from holding Timothy Largemid Cap Value or generate 14.03% return on investment over 90 days.

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

Vanguard Extended Market  vs.  Timothy Largemid Cap Value

Vanguard Extended Market

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Extended Market has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong primary indicators, Vanguard Extended is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Timothy Large/mid-cap

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Timothy Largemid Cap Value are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Timothy Large/mid-cap 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 Extended and Timothy Large/mid-cap

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

The idea behind Vanguard Extended Market and Timothy Largemid Cap Value 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.