Correlation Between Multi Units and Vanguard FTSE

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

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

Diversification Opportunities for Multi Units and Vanguard FTSE

0.79

Correlation Coefficient

Multi Units  Vanguard FTSE

Poor diversification

The 3 months correlation between Multi and Vanguard is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Multi Units Luxembourg and Vanguard FTSE Developed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard FTSE Developed and Multi Units 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 Multi Units Luxembourg are associated (or correlated) with Vanguard FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard FTSE Developed has no effect on the direction of Multi Units i.e., Multi Units and Vanguard FTSE go up and down completely randomly.

Pair Corralation between Multi Units and Vanguard FTSE

Assuming the 90 days trading horizon Multi Units is expected to generate 2.03 times less return on investment than Vanguard FTSE. But when comparing it to its historical volatility, Multi Units Luxembourg is 1.17 times less risky than Vanguard FTSE. It trades about 0.12 of its potential returns per unit of risk. Vanguard FTSE Developed is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  4,627  in Vanguard FTSE Developed on December 22, 2024 and sell it today you would earn a total of  655.00  from holding Vanguard FTSE Developed or generate 14.16% return on investment over 90 days.

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

Multi Units Luxembourg  vs.  Vanguard FTSE Developed

Multi Units Luxembourg

Risk-Adjusted Performance

OK

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

Vanguard FTSE Developed

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard FTSE Developed are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Vanguard FTSE unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Multi Units and Vanguard FTSE

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

The idea behind Multi Units Luxembourg and Vanguard FTSE Developed 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.

Check out your portfolio center.

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.