Correlation Between Vanguard Mid-cap and Green Century

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

By analyzing existing cross correlation between Vanguard Mid Cap Index and Green Century Equity, you can compare the effects of market volatilities on Vanguard Mid-cap and Green Century 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 Mid-cap with a short position of Green Century. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Mid-cap and Green Century.

Diversification Opportunities for Vanguard Mid-cap and Green Century

0.96

Correlation Coefficient

Vanguard Mid-cap  Green Century

Almost no diversification

The 3 months correlation between Vanguard and Green is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Mid Cap Index and Green Century Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Green Century Equity and Vanguard Mid-cap 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 Mid Cap Index are associated (or correlated) with Green Century. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Green Century Equity has no effect on the direction of Vanguard Mid-cap i.e., Vanguard Mid-cap and Green Century go up and down completely randomly.

Pair Corralation between Vanguard Mid-cap and Green Century

Assuming the 90 days horizon Vanguard Mid Cap Index is expected to under-perform the Green Century. But the mutual fund apears to be less risky and, when comparing its historical volatility, Vanguard Mid Cap Index is 1.24 times less risky than Green Century. The mutual fund trades about -0.2 of its potential returns per unit of risk. The Green Century Equity is currently generating about -0.16 of returns per unit of risk over similar time horizon. If you would invest  8,350  in Green Century Equity on January 29, 2024 and sell it today you would lose (257.00) from holding Green Century Equity or give up 3.08% of portfolio value over 90 days.

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

Vanguard Mid Cap Index  vs.  Green Century Equity

Vanguard Mid Cap

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Mid Cap Index are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Vanguard Mid-cap is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Green Century Equity

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Green Century Equity are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Green Century 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 Mid-cap and Green Century

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

The idea behind Vanguard Mid Cap Index and Green Century Equity 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.