Correlation Between Chartwell Short and Vanguard Extended

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

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

Diversification Opportunities for Chartwell Short and Vanguard Extended

0.85

Correlation Coefficient

Chartwell Short  Vanguard Extended

Very poor diversification

The 3 months correlation between Chartwell and Vanguard is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Chartwell Short Duration and Vanguard Extended Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Extended Market and Chartwell Short 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 Chartwell Short Duration 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 Market has no effect on the direction of Chartwell Short i.e., Chartwell Short and Vanguard Extended go up and down completely randomly.

Pair Corralation between Chartwell Short and Vanguard Extended

Assuming the 90 days horizon Chartwell Short is expected to generate 1232.0 times less return on investment than Vanguard Extended. But when comparing it to its historical volatility, Chartwell Short Duration is 10.79 times less risky than Vanguard Extended. It trades about 0.0 of its potential returns per unit of risk. Vanguard Extended Market is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  33,736  in Vanguard Extended Market on October 7, 2024 and sell it today you would earn a total of  2,557  from holding Vanguard Extended Market or generate 7.58% return on investment over 90 days.

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

Chartwell Short Duration  vs.  Vanguard Extended Market

Chartwell Short Duration

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chartwell Short Duration has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Chartwell Short is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Vanguard Extended Market

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Extended Market are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Vanguard Extended may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Chartwell Short and Vanguard Extended

The main advantage of trading using opposite Chartwell Short and Vanguard Extended positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chartwell Short 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 Chartwell Short Duration and Vanguard Extended Market 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.