Correlation Between T REX and Vanguard Short

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

By analyzing existing cross correlation between T REX 2X Long and Vanguard Short Term Treasury, you can compare the effects of market volatilities on T REX and Vanguard Short 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 T REX with a short position of Vanguard Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of T REX and Vanguard Short.

Diversification Opportunities for T REX and Vanguard Short

-0.38

Correlation Coefficient

T REX  Vanguard Short

Very good diversification

The 3 months correlation between MSTU and Vanguard is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding T REX 2X Long and Vanguard Short Term Treasury in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Short Term and T REX 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 T REX 2X Long are associated (or correlated) with Vanguard Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Short Term has no effect on the direction of T REX i.e., T REX and Vanguard Short go up and down completely randomly.

Pair Corralation between T REX and Vanguard Short

Given the investment horizon of 90 days T REX 2X Long is expected to generate 128.38 times more return on investment than Vanguard Short. However, T REX is 128.38 times more volatile than Vanguard Short Term Treasury. It trades about 0.31 of its potential returns per unit of risk. Vanguard Short Term Treasury is currently generating about 0.01 per unit of risk. If you would invest  2,552  in T REX 2X Long on September 3, 2024 and sell it today you would earn a total of  13,309  from holding T REX 2X Long or generate 521.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	82.81%
Values	Daily Returns

T REX 2X Long  vs.  Vanguard Short Term Treasury

T REX 2X

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in T REX 2X Long are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, T REX unveiled solid returns over the last few months and may actually be approaching a breakup point.

Vanguard Short Term

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days Vanguard Short Term Treasury has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Vanguard Short is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with T REX and Vanguard Short

The main advantage of trading using opposite T REX and Vanguard Short positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if T REX position performs unexpectedly, Vanguard Short 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 Short will offset losses from the drop in Vanguard Short's long position.

The idea behind T REX 2X Long and Vanguard Short Term Treasury 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.