Correlation Between Cboe Vest and Vest Large

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

By analyzing existing cross correlation between Cboe Vest Sp and Vest Large Cap, you can compare the effects of market volatilities on Cboe Vest and Vest Large 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 Cboe Vest with a short position of Vest Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cboe Vest and Vest Large.

Diversification Opportunities for Cboe Vest and Vest Large

0.26

Correlation Coefficient

Cboe Vest  Vest Large

Modest diversification

The 3 months correlation between Cboe and Vest is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Cboe Vest Sp and Vest Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vest Large Cap and Cboe Vest 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 Cboe Vest Sp are associated (or correlated) with Vest Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vest Large Cap has no effect on the direction of Cboe Vest i.e., Cboe Vest and Vest Large go up and down completely randomly.

Pair Corralation between Cboe Vest and Vest Large

Assuming the 90 days horizon Cboe Vest Sp is expected to under-perform the Vest Large. But the mutual fund apears to be less risky and, when comparing its historical volatility, Cboe Vest Sp is 3.45 times less risky than Vest Large. The mutual fund trades about -0.16 of its potential returns per unit of risk. The Vest Large Cap is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  766.00  in Vest Large Cap on October 15, 2024 and sell it today you would earn a total of  30.00  from holding Vest Large Cap or generate 3.92% return on investment over 90 days.

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

Cboe Vest Sp  vs.  Vest Large Cap

Cboe Vest Sp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Cboe Vest Sp are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Cboe Vest is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Vest Large Cap

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vest Large Cap are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Vest Large is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Cboe Vest and Vest Large

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

The idea behind Cboe Vest Sp and Vest Large Cap 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.