Correlation Between Sparta Capital and Vanguard Mid

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

By analyzing existing cross correlation between Sparta Capital and Vanguard Mid Cap Value, you can compare the effects of market volatilities on Sparta Capital and Vanguard Mid 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 Sparta Capital with a short position of Vanguard Mid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sparta Capital and Vanguard Mid.

Diversification Opportunities for Sparta Capital and Vanguard Mid

0.41

Correlation Coefficient

Sparta Capital  Vanguard Mid

Very weak diversification

The 3 months correlation between Sparta and Vanguard is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Sparta Capital and Vanguard Mid Cap Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Mid Cap and Sparta Capital 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 Sparta Capital are associated (or correlated) with Vanguard Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Mid Cap has no effect on the direction of Sparta Capital i.e., Sparta Capital and Vanguard Mid go up and down completely randomly.

Pair Corralation between Sparta Capital and Vanguard Mid

Assuming the 90 days horizon Sparta Capital is expected to generate 22.06 times more return on investment than Vanguard Mid. However, Sparta Capital is 22.06 times more volatile than Vanguard Mid Cap Value. It trades about 0.01 of its potential returns per unit of risk. Vanguard Mid Cap Value is currently generating about -0.02 per unit of risk. If you would invest  1.03  in Sparta Capital on December 30, 2024 and sell it today you would lose (0.92) from holding Sparta Capital or give up 89.32% of portfolio value over 90 days.

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

Sparta Capital  vs.  Vanguard Mid Cap Value

Sparta Capital

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sparta Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly uncertain basic indicators, Sparta Capital may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Vanguard Mid Cap

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Sparta Capital and Vanguard Mid

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

The idea behind Sparta Capital and Vanguard Mid Cap Value 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.