Correlation Between Dana Large and Vanguard European

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

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

Diversification Opportunities for Dana Large and Vanguard European

-0.42

Correlation Coefficient

Dana Large  Vanguard European

Very good diversification

The 3 months correlation between Dana and Vanguard is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Dana Large Cap and Vanguard European Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard European Stock and Dana Large 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 Dana Large Cap are associated (or correlated) with Vanguard European. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard European Stock has no effect on the direction of Dana Large i.e., Dana Large and Vanguard European go up and down completely randomly.

Pair Corralation between Dana Large and Vanguard European

Assuming the 90 days horizon Dana Large Cap is expected to under-perform the Vanguard European. In addition to that, Dana Large is 2.89 times more volatile than Vanguard European Stock. It trades about -0.15 of its total potential returns per unit of risk. Vanguard European Stock is currently generating about 0.24 per unit of volatility. If you would invest  3,422  in Vanguard European Stock on December 21, 2024 and sell it today you would earn a total of  483.00  from holding Vanguard European Stock or generate 14.11% return on investment over 90 days.

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

Dana Large Cap  vs.  Vanguard European Stock

Dana Large Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dana Large Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's forward indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Vanguard European Stock

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard European Stock are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Vanguard European showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dana Large and Vanguard European

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

The idea behind Dana Large Cap and Vanguard European Stock 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.