Correlation Between LJIM and Vanguard Total

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

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

Diversification Opportunities for LJIM and Vanguard Total

0.65

Correlation Coefficient

LJIM  Vanguard Total

Poor diversification

The 3 months correlation between LJIM and Vanguard is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding LJIM and Vanguard Total Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Total Stock and LJIM 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 LJIM are associated (or correlated) with Vanguard Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Total Stock has no effect on the direction of LJIM i.e., LJIM and Vanguard Total go up and down completely randomly.

Pair Corralation between LJIM and Vanguard Total

If you would invest  2,852  in LJIM on October 7, 2024 and sell it today you would earn a total of  0.00  from holding LJIM or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	5.0%
Values	Daily Returns

LJIM  vs.  Vanguard Total Stock

LJIM

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LJIM has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, LJIM is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Vanguard Total Stock

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Total Stock are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Vanguard Total is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with LJIM and Vanguard Total

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

The idea behind LJIM and Vanguard Total 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.

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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.