Correlation Between WSDMTR ERNGS and Vanguard Index

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

By analyzing existing cross correlation between WSDMTR ERNGS 500 and Vanguard Index Funds, you can compare the effects of market volatilities on WSDMTR ERNGS and Vanguard Index 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 WSDMTR ERNGS with a short position of Vanguard Index. Check out your portfolio center. Please also check ongoing floating volatility patterns of WSDMTR ERNGS and Vanguard Index.

Diversification Opportunities for WSDMTR ERNGS and Vanguard Index

0.86

Correlation Coefficient

WSDMTR ERNGS  Vanguard Index

Very poor diversification

The 3 months correlation between WSDMTR and Vanguard is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding WSDMTR ERNGS 500 and Vanguard Index Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Index Funds and WSDMTR ERNGS 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 WSDMTR ERNGS 500 are associated (or correlated) with Vanguard Index. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Index Funds has no effect on the direction of WSDMTR ERNGS i.e., WSDMTR ERNGS and Vanguard Index go up and down completely randomly.

Pair Corralation between WSDMTR ERNGS and Vanguard Index

Assuming the 90 days trading horizon WSDMTR ERNGS is expected to generate 32.91 times less return on investment than Vanguard Index. But when comparing it to its historical volatility, WSDMTR ERNGS 500 is 1.44 times less risky than Vanguard Index. It trades about 0.0 of its potential returns per unit of risk. Vanguard Index Funds is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  565,300  in Vanguard Index Funds on September 23, 2024 and sell it today you would earn a total of  24,700  from holding Vanguard Index Funds or generate 4.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	97.62%
Values	Daily Returns

WSDMTR ERNGS 500  vs.  Vanguard Index Funds

WSDMTR ERNGS 500

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in WSDMTR ERNGS 500 are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, WSDMTR ERNGS may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Vanguard Index Funds

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Index Funds are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating forward indicators, Vanguard Index may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with WSDMTR ERNGS and Vanguard Index

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

The idea behind WSDMTR ERNGS 500 and Vanguard Index Funds 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.