Correlation Between Vanguard Bond and FibraHotel

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

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

Diversification Opportunities for Vanguard Bond and FibraHotel

0.54

Correlation Coefficient

Vanguard Bond  FibraHotel

Very weak diversification

The 3 months correlation between Vanguard and FibraHotel is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Bond Index and FibraHotel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FibraHotel and Vanguard Bond 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 Bond Index are associated (or correlated) with FibraHotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FibraHotel has no effect on the direction of Vanguard Bond i.e., Vanguard Bond and FibraHotel go up and down completely randomly.

Pair Corralation between Vanguard Bond and FibraHotel

Assuming the 90 days trading horizon Vanguard Bond is expected to generate 2.86 times less return on investment than FibraHotel. But when comparing it to its historical volatility, Vanguard Bond Index is 3.32 times less risky than FibraHotel. It trades about 0.12 of its potential returns per unit of risk. FibraHotel is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  831.00  in FibraHotel on October 5, 2024 and sell it today you would earn a total of  166.00  from holding FibraHotel or generate 19.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.67%
Values	Daily Returns

Vanguard Bond Index  vs.  FibraHotel

Vanguard Bond Index

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Bond Index are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, Vanguard Bond may actually be approaching a critical reversion point that can send shares even higher in February 2025.

FibraHotel

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in FibraHotel are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain technical indicators, FibraHotel sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vanguard Bond and FibraHotel

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

The idea behind Vanguard Bond Index and FibraHotel 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.