Correlation Between Mh Elite and Vanguard Small-cap

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

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

Diversification Opportunities for Mh Elite and Vanguard Small-cap

0.56

Correlation Coefficient

Mh Elite  Vanguard Small-cap

Very weak diversification

The 3 months correlation between MHEIX and Vanguard is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Mh Elite Income and Vanguard Small Cap Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Small Cap and Mh Elite 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 Mh Elite Income are associated (or correlated) with Vanguard Small-cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Small Cap has no effect on the direction of Mh Elite i.e., Mh Elite and Vanguard Small-cap go up and down completely randomly.

Pair Corralation between Mh Elite and Vanguard Small-cap

Assuming the 90 days horizon Mh Elite Income is expected to under-perform the Vanguard Small-cap. In addition to that, Mh Elite is 1.09 times more volatile than Vanguard Small Cap Index. It trades about -0.15 of its total potential returns per unit of risk. Vanguard Small Cap Index is currently generating about 0.22 per unit of volatility. If you would invest  11,688  in Vanguard Small Cap Index on October 25, 2024 and sell it today you would earn a total of  414.00  from holding Vanguard Small Cap Index or generate 3.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Mh Elite Income  vs.  Vanguard Small Cap Index

Mh Elite Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mh Elite Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Mh Elite is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Vanguard Small Cap

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Small Cap Index are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Vanguard Small-cap may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Mh Elite and Vanguard Small-cap

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

The idea behind Mh Elite Income and Vanguard Small 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.