Correlation Between Vanguard Total and SmartETFs Dividend

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

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

Diversification Opportunities for Vanguard Total and SmartETFs Dividend

0.85

Correlation Coefficient

Vanguard Total  SmartETFs Dividend

Very poor diversification

The 3 months correlation between Vanguard and SmartETFs is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Bond and SmartETFs Dividend Builder in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SmartETFs Dividend and Vanguard Total 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 Total Bond are associated (or correlated) with SmartETFs Dividend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SmartETFs Dividend has no effect on the direction of Vanguard Total i.e., Vanguard Total and SmartETFs Dividend go up and down completely randomly.

Pair Corralation between Vanguard Total and SmartETFs Dividend

Considering the 90-day investment horizon Vanguard Total is expected to generate 1.12 times less return on investment than SmartETFs Dividend. But when comparing it to its historical volatility, Vanguard Total Bond is 2.59 times less risky than SmartETFs Dividend. It trades about 0.16 of its potential returns per unit of risk. SmartETFs Dividend Builder is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,866  in SmartETFs Dividend Builder on December 23, 2024 and sell it today you would earn a total of  87.00  from holding SmartETFs Dividend Builder or generate 3.04% return on investment over 90 days.

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

Vanguard Total Bond  vs.  SmartETFs Dividend Builder

Vanguard Total Bond

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Total Bond are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Vanguard Total is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

SmartETFs Dividend

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SmartETFs Dividend Builder are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, SmartETFs Dividend is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Vanguard Total and SmartETFs Dividend

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

The idea behind Vanguard Total Bond and SmartETFs Dividend Builder 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.