Correlation Between Quadratic Deflation and Vanguard Extended

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

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

Diversification Opportunities for Quadratic Deflation and Vanguard Extended

0.56

Correlation Coefficient

Quadratic Deflation  Vanguard Extended

Very weak diversification

The 3 months correlation between Quadratic and Vanguard is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Quadratic Deflation ETF and Vanguard Extended Duration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Extended and Quadratic Deflation 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 Quadratic Deflation ETF are associated (or correlated) with Vanguard Extended. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Extended has no effect on the direction of Quadratic Deflation i.e., Quadratic Deflation and Vanguard Extended go up and down completely randomly.

Pair Corralation between Quadratic Deflation and Vanguard Extended

Given the investment horizon of 90 days Quadratic Deflation ETF is expected to under-perform the Vanguard Extended. But the etf apears to be less risky and, when comparing its historical volatility, Quadratic Deflation ETF is 1.72 times less risky than Vanguard Extended. The etf trades about -0.02 of its potential returns per unit of risk. The Vanguard Extended Duration is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  6,727  in Vanguard Extended Duration on December 27, 2024 and sell it today you would earn a total of  187.00  from holding Vanguard Extended Duration or generate 2.78% return on investment over 90 days.

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

Quadratic Deflation ETF  vs.  Vanguard Extended Duration

Quadratic Deflation ETF

Risk-Adjusted Performance

Very Weak

Over the last 90 days Quadratic Deflation ETF has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Quadratic Deflation is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Vanguard Extended

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Extended Duration are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable fundamental indicators, Vanguard Extended is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Quadratic Deflation and Vanguard Extended

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

The idea behind Quadratic Deflation ETF and Vanguard Extended Duration 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.