Correlation Between Absolute Core and Vanguard Mega

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

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

Diversification Opportunities for Absolute Core and Vanguard Mega

-0.59

Correlation Coefficient

Absolute Core  Vanguard Mega

Excellent diversification

The 3 months correlation between Absolute and Vanguard is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Absolute Core Strategy and Vanguard Mega Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Mega Cap and Absolute Core 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 Absolute Core Strategy are associated (or correlated) with Vanguard Mega. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Mega Cap has no effect on the direction of Absolute Core i.e., Absolute Core and Vanguard Mega go up and down completely randomly.

Pair Corralation between Absolute Core and Vanguard Mega

Given the investment horizon of 90 days Absolute Core Strategy is expected to generate 0.38 times more return on investment than Vanguard Mega. However, Absolute Core Strategy is 2.65 times less risky than Vanguard Mega. It trades about 0.22 of its potential returns per unit of risk. Vanguard Mega Cap is currently generating about -0.12 per unit of risk. If you would invest  3,143  in Absolute Core Strategy on December 28, 2024 and sell it today you would earn a total of  237.00  from holding Absolute Core Strategy or generate 7.54% return on investment over 90 days.

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

Absolute Core Strategy  vs.  Vanguard Mega Cap

Absolute Core Strategy

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Absolute Core Strategy are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical and fundamental indicators, Absolute Core may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Vanguard Mega Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Mega Cap has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest abnormal performance, the Etf's technical and fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the ETF venture institutional investors.

Pair Trading with Absolute Core and Vanguard Mega

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

The idea behind Absolute Core Strategy and Vanguard Mega Cap 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.