Correlation Between Vanguard International and Standard Foods

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

By analyzing existing cross correlation between Vanguard International Semiconductor and Standard Foods Corp, you can compare the effects of market volatilities on Vanguard International and Standard Foods 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 International with a short position of Standard Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard International and Standard Foods.

Diversification Opportunities for Vanguard International and Standard Foods

-0.27

Correlation Coefficient

Vanguard International  Standard Foods

Very good diversification

The 3 months correlation between Vanguard and Standard is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard International Semicon and Standard Foods Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Standard Foods Corp and Vanguard International 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 International Semiconductor are associated (or correlated) with Standard Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Standard Foods Corp has no effect on the direction of Vanguard International i.e., Vanguard International and Standard Foods go up and down completely randomly.

Pair Corralation between Vanguard International and Standard Foods

Assuming the 90 days trading horizon Vanguard International Semiconductor is expected to generate 2.6 times more return on investment than Standard Foods. However, Vanguard International is 2.6 times more volatile than Standard Foods Corp. It trades about -0.04 of its potential returns per unit of risk. Standard Foods Corp is currently generating about -0.37 per unit of risk. If you would invest  9,570  in Vanguard International Semiconductor on October 22, 2024 and sell it today you would lose (200.00) from holding Vanguard International Semiconductor or give up 2.09% of portfolio value over 90 days.

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

Vanguard International Semicon  vs.  Standard Foods Corp

Vanguard International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard International Semiconductor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Vanguard International is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Standard Foods Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Standard Foods Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Vanguard International and Standard Foods

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

The idea behind Vanguard International Semiconductor and Standard Foods Corp 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.