Correlation Between Themes Global and Vanguard Industrials

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

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

Diversification Opportunities for Themes Global and Vanguard Industrials

-0.17

Correlation Coefficient

Themes Global  Vanguard Industrials

Good diversification

The 3 months correlation between Themes and Vanguard is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Themes Global Systemically and Vanguard Industrials Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Industrials and Themes Global 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 Themes Global Systemically are associated (or correlated) with Vanguard Industrials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Industrials has no effect on the direction of Themes Global i.e., Themes Global and Vanguard Industrials go up and down completely randomly.

Pair Corralation between Themes Global and Vanguard Industrials

Given the investment horizon of 90 days Themes Global Systemically is expected to generate 1.15 times more return on investment than Vanguard Industrials. However, Themes Global is 1.15 times more volatile than Vanguard Industrials Index. It trades about 0.22 of its potential returns per unit of risk. Vanguard Industrials Index is currently generating about -0.04 per unit of risk. If you would invest  3,322  in Themes Global Systemically on December 28, 2024 and sell it today you would earn a total of  552.00  from holding Themes Global Systemically or generate 16.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Themes Global Systemically  vs.  Vanguard Industrials Index

Themes Global System

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Themes Global Systemically are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain forward indicators, Themes Global sustained solid returns over the last few months and may actually be approaching a breakup point.

Vanguard Industrials

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Industrials Index has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable forward indicators, Vanguard Industrials is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Themes Global and Vanguard Industrials

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

The idea behind Themes Global Systemically and Vanguard Industrials 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.

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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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.