Correlation Between SPACE and Vanguard Mid

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

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

Diversification Opportunities for SPACE and Vanguard Mid

0.85

Correlation Coefficient

SPACE  Vanguard Mid

Very poor diversification

The 3 months correlation between SPACE and Vanguard is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding SPACE and Vanguard Mid Cap Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Mid Cap and SPACE 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 SPACE 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 SPACE i.e., SPACE and Vanguard Mid go up and down completely randomly.

Pair Corralation between SPACE and Vanguard Mid

Assuming the 90 days horizon SPACE is expected to generate 6.35 times more return on investment than Vanguard Mid. However, SPACE is 6.35 times more volatile than Vanguard Mid Cap Value. It trades about 0.51 of its potential returns per unit of risk. Vanguard Mid Cap Value is currently generating about 0.37 per unit of risk. If you would invest  36.00  in SPACE on September 4, 2024 and sell it today you would earn a total of  23.00  from holding SPACE or generate 63.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.45%
Values	Daily Returns

SPACE  vs.  Vanguard Mid Cap Value

SPACE

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SPACE are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, SPACE exhibited solid returns over the last few months and may actually be approaching a breakup point.

Vanguard Mid Cap

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Mid Cap Value are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Vanguard Mid may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with SPACE and Vanguard Mid

The main advantage of trading using opposite SPACE and Vanguard Mid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPACE 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 SPACE and Vanguard Mid Cap Value 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.