Correlation Between Vanguard Value and United States

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

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

Diversification Opportunities for Vanguard Value and United States

0.47

Correlation Coefficient

Vanguard Value  United States

Very weak diversification

The 3 months correlation between Vanguard and United is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Value Index and United States Brent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United States Brent and Vanguard 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 Vanguard Value Index are associated (or correlated) with United States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United States Brent has no effect on the direction of Vanguard Value i.e., Vanguard Value and United States go up and down completely randomly.

Pair Corralation between Vanguard Value and United States

Considering the 90-day investment horizon Vanguard Value Index is expected to generate 0.42 times more return on investment than United States. However, Vanguard Value Index is 2.36 times less risky than United States. It trades about 0.37 of its potential returns per unit of risk. United States Brent is currently generating about -0.31 per unit of risk. If you would invest  15,543  in Vanguard Value Index on February 15, 2024 and sell it today you would earn a total of  650.00  from holding Vanguard Value Index or generate 4.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.65%
Values	Daily Returns

Vanguard Value Index  vs.  United States Brent

Vanguard Value Index

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Value Index are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Vanguard Value is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

United States Brent

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in United States Brent are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, United States is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Vanguard Value and United States

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

The idea behind Vanguard Value Index and United States Brent 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.