Correlation Between Scout Core and Vanguard Information

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

By analyzing existing cross correlation between Scout E Bond and Vanguard Information Technology, you can compare the effects of market volatilities on Scout Core and Vanguard Information 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 Scout Core with a short position of Vanguard Information. Check out your portfolio center. Please also check ongoing floating volatility patterns of Scout Core and Vanguard Information.

Diversification Opportunities for Scout Core and Vanguard Information

-0.43

Correlation Coefficient

Scout Core  Vanguard Information

Very good diversification

The 3 months correlation between Scout and Vanguard is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Scout E Bond and Vanguard Information Technolog in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Information and Scout Core 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 Scout E Bond are associated (or correlated) with Vanguard Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Information has no effect on the direction of Scout Core i.e., Scout Core and Vanguard Information go up and down completely randomly.

Pair Corralation between Scout Core and Vanguard Information

Assuming the 90 days horizon Scout E Bond is expected to under-perform the Vanguard Information. But the mutual fund apears to be less risky and, when comparing its historical volatility, Scout E Bond is 5.16 times less risky than Vanguard Information. The mutual fund trades about -0.54 of its potential returns per unit of risk. The Vanguard Information Technology is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  32,755  in Vanguard Information Technology on October 8, 2024 and sell it today you would lose (351.00) from holding Vanguard Information Technology or give up 1.07% of portfolio value over 90 days.

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

Scout E Bond  vs.  Vanguard Information Technolog

Scout E Bond

Risk-Adjusted Performance

0 of 100

Very Weak

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

Vanguard Information

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Information Technology are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Vanguard Information may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Scout Core and Vanguard Information

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

The idea behind Scout E Bond and Vanguard Information Technology 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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.