Correlation Between Omni Small and Vanguard Total

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

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

Diversification Opportunities for Omni Small and Vanguard Total

-0.47

Correlation Coefficient

Omni Small  Vanguard Total

Very good diversification

The 3 months correlation between Omni and Vanguard is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Omni Small Cap Value and Vanguard Total Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Total Bond and Omni Small 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 Omni Small Cap Value 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 Bond has no effect on the direction of Omni Small i.e., Omni Small and Vanguard Total go up and down completely randomly.

Pair Corralation between Omni Small and Vanguard Total

Assuming the 90 days horizon Omni Small Cap Value is expected to under-perform the Vanguard Total. In addition to that, Omni Small is 3.93 times more volatile than Vanguard Total Bond. It trades about -0.13 of its total potential returns per unit of risk. Vanguard Total Bond is currently generating about 0.17 per unit of volatility. If you would invest  926.00  in Vanguard Total Bond on December 21, 2024 and sell it today you would earn a total of  27.00  from holding Vanguard Total Bond or generate 2.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

Omni Small Cap Value  vs.  Vanguard Total Bond

Omni Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Omni Small Cap Value has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

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 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward 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 Omni Small and Vanguard Total

The main advantage of trading using opposite Omni Small and Vanguard Total positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Omni Small 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 Omni Small Cap Value and Vanguard Total Bond 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 Global Correlations module to find global opportunities by holding instruments from different markets.