Correlation Between DSJA and Vanguard Mid

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

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

Diversification Opportunities for DSJA and Vanguard Mid

0.9

Correlation Coefficient

DSJA  Vanguard Mid

Almost no diversification

The 3 months correlation between DSJA and Vanguard is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding DSJA and Vanguard Mid Cap Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Mid Cap and DSJA 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 DSJA are associated (or correlated) with Vanguard Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Mid Cap has no effect on the direction of DSJA i.e., DSJA and Vanguard Mid go up and down completely randomly.

Pair Corralation between DSJA and Vanguard Mid

If you would invest  25,203  in Vanguard Mid Cap Index on September 1, 2024 and sell it today you would earn a total of  3,260  from holding Vanguard Mid Cap Index or generate 12.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	1.59%
Values	Daily Returns

DSJA  vs.  Vanguard Mid Cap Index

DSJA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DSJA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward-looking indicators, DSJA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Vanguard Mid Cap

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Mid Cap Index are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Vanguard Mid may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with DSJA and Vanguard Mid

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

The idea behind DSJA and Vanguard Mid Cap Index 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.