Correlation Between FlexShares Quality and Vanguard High

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

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

Diversification Opportunities for FlexShares Quality and Vanguard High

0.9

Correlation Coefficient

FlexShares Quality  Vanguard High

Almost no diversification

The 3 months correlation between FlexShares and Vanguard is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding FlexShares Quality Dividend and Vanguard High Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard High Dividend and FlexShares Quality 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 FlexShares Quality Dividend are associated (or correlated) with Vanguard High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard High Dividend has no effect on the direction of FlexShares Quality i.e., FlexShares Quality and Vanguard High go up and down completely randomly.

Pair Corralation between FlexShares Quality and Vanguard High

Considering the 90-day investment horizon FlexShares Quality is expected to generate 1.36 times less return on investment than Vanguard High. In addition to that, FlexShares Quality is 1.04 times more volatile than Vanguard High Dividend. It trades about 0.07 of its total potential returns per unit of risk. Vanguard High Dividend is currently generating about 0.1 per unit of volatility. If you would invest  11,714  in Vanguard High Dividend on October 7, 2024 and sell it today you would earn a total of  1,128  from holding Vanguard High Dividend or generate 9.63% return on investment over 90 days.

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

FlexShares Quality Dividend  vs.  Vanguard High Dividend

FlexShares Quality

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in FlexShares Quality Dividend are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, FlexShares Quality is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Vanguard High Dividend

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard High Dividend are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Vanguard High is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with FlexShares Quality and Vanguard High

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

The idea behind FlexShares Quality Dividend and Vanguard High Dividend 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.