Correlation Between Leisure Fund and Vanguard Consumer

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

By analyzing existing cross correlation between Leisure Fund Class and Vanguard Sumer Discretionary, you can compare the effects of market volatilities on Leisure Fund and Vanguard Consumer 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 Leisure Fund with a short position of Vanguard Consumer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leisure Fund and Vanguard Consumer.

Diversification Opportunities for Leisure Fund and Vanguard Consumer

0.86

Correlation Coefficient

Leisure Fund  Vanguard Consumer

Very poor diversification

The 3 months correlation between Leisure and Vanguard is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Leisure Fund Class and Vanguard Sumer Discretionary in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Sumer Discr and Leisure Fund 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 Leisure Fund Class are associated (or correlated) with Vanguard Consumer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Sumer Discr has no effect on the direction of Leisure Fund i.e., Leisure Fund and Vanguard Consumer go up and down completely randomly.

Pair Corralation between Leisure Fund and Vanguard Consumer

Assuming the 90 days horizon Leisure Fund Class is expected to under-perform the Vanguard Consumer. But the mutual fund apears to be less risky and, when comparing its historical volatility, Leisure Fund Class is 1.54 times less risky than Vanguard Consumer. The mutual fund trades about -0.28 of its potential returns per unit of risk. The Vanguard Sumer Discretionary is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  19,620  in Vanguard Sumer Discretionary on October 4, 2024 and sell it today you would lose (412.00) from holding Vanguard Sumer Discretionary or give up 2.1% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.45%
Values	Daily Returns

Leisure Fund Class  vs.  Vanguard Sumer Discretionary

Leisure Fund Class

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Leisure Fund Class are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Leisure Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Vanguard Sumer Discr

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Sumer Discretionary are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Vanguard Consumer may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Leisure Fund and Vanguard Consumer

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

The idea behind Leisure Fund Class and Vanguard Sumer Discretionary 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.