Correlation Between Vanguard Mid and Ariel Appreciation

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

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

Diversification Opportunities for Vanguard Mid and Ariel Appreciation

0.72

Correlation Coefficient

Vanguard Mid  Ariel Appreciation

Poor diversification

The 3 months correlation between Vanguard and Ariel is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Mid Cap Value and Ariel Appreciation Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ariel Appreciation and Vanguard Mid 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 Value are associated (or correlated) with Ariel Appreciation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ariel Appreciation has no effect on the direction of Vanguard Mid i.e., Vanguard Mid and Ariel Appreciation go up and down completely randomly.

Pair Corralation between Vanguard Mid and Ariel Appreciation

Assuming the 90 days horizon Vanguard Mid Cap Value is expected to generate 0.67 times more return on investment than Ariel Appreciation. However, Vanguard Mid Cap Value is 1.5 times less risky than Ariel Appreciation. It trades about -0.05 of its potential returns per unit of risk. Ariel Appreciation Fund is currently generating about -0.12 per unit of risk. If you would invest  7,973  in Vanguard Mid Cap Value on February 7, 2024 and sell it today you would lose (73.00) from holding Vanguard Mid Cap Value or give up 0.92% of portfolio value over 90 days.

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

Vanguard Mid Cap Value  vs.  Ariel Appreciation Fund

Vanguard Mid Cap

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Mid Cap Value are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Vanguard Mid is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Ariel Appreciation

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ariel Appreciation Fund are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Ariel Appreciation 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 and Ariel Appreciation

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

The idea behind Vanguard Mid Cap Value and Ariel Appreciation Fund 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 CEOs Directory module to screen CEOs from public companies around the world.