Correlation Between Adams Diversified and Vanguard Total

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

By analyzing existing cross correlation between Adams Diversified Equity and Vanguard Total Stock, you can compare the effects of market volatilities on Adams Diversified and Vanguard Total 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 Adams Diversified with a short position of Vanguard Total. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adams Diversified and Vanguard Total.

Diversification Opportunities for Adams Diversified and Vanguard Total

0.94

Correlation Coefficient

Adams Diversified  Vanguard Total

Almost no diversification

The 3 months correlation between Adams and Vanguard is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Adams Diversified Equity and Vanguard Total Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Total Stock and Adams Diversified 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 Adams Diversified Equity are associated (or correlated) with Vanguard Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Total Stock has no effect on the direction of Adams Diversified i.e., Adams Diversified and Vanguard Total go up and down completely randomly.

Pair Corralation between Adams Diversified and Vanguard Total

Considering the 90-day investment horizon Adams Diversified Equity is expected to under-perform the Vanguard Total. But the fund apears to be less risky and, when comparing its historical volatility, Adams Diversified Equity is 1.03 times less risky than Vanguard Total. The fund trades about -0.07 of its potential returns per unit of risk. The Vanguard Total Stock is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  14,155  in Vanguard Total Stock on December 29, 2024 and sell it today you would lose (573.00) from holding Vanguard Total Stock or give up 4.05% of portfolio value over 90 days.

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

Adams Diversified Equity  vs.  Vanguard Total Stock

Adams Diversified Equity

Risk-Adjusted Performance

Very Weak

Over the last 90 days Adams Diversified Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Adams Diversified is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Vanguard Total Stock

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Total Stock has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong primary indicators, Vanguard Total is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Adams Diversified and Vanguard Total

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

The idea behind Adams Diversified Equity and Vanguard Total Stock 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.

Check out your portfolio center.

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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.