Correlation Between Cboe Validus and Vanguard Minimum

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

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

Diversification Opportunities for Cboe Validus and Vanguard Minimum

0.09

Correlation Coefficient

Cboe Validus  Vanguard Minimum

Significant diversification

The 3 months correlation between Cboe and Vanguard is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Cboe Validus SP and Vanguard Minimum Volatility in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Minimum Vol and Cboe Validus 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 Cboe Validus SP are associated (or correlated) with Vanguard Minimum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Minimum Vol has no effect on the direction of Cboe Validus i.e., Cboe Validus and Vanguard Minimum go up and down completely randomly.

Pair Corralation between Cboe Validus and Vanguard Minimum

Given the investment horizon of 90 days Cboe Validus SP is expected to under-perform the Vanguard Minimum. In addition to that, Cboe Validus is 1.61 times more volatile than Vanguard Minimum Volatility. It trades about -0.03 of its total potential returns per unit of risk. Vanguard Minimum Volatility is currently generating about 0.12 per unit of volatility. If you would invest  12,006  in Vanguard Minimum Volatility on December 28, 2024 and sell it today you would earn a total of  550.98  from holding Vanguard Minimum Volatility or generate 4.59% return on investment over 90 days.

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

Cboe Validus SP  vs.  Vanguard Minimum Volatility

Cboe Validus SP

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cboe Validus SP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Cboe Validus is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Vanguard Minimum Vol

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Minimum Volatility are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable primary indicators, Vanguard Minimum is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Cboe Validus and Vanguard Minimum

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

The idea behind Cboe Validus SP and Vanguard Minimum Volatility 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.