Correlation Between Simt Large and Vanguard Value

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

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

Diversification Opportunities for Simt Large and Vanguard Value

0.98

Correlation Coefficient

Simt Large  Vanguard Value

Almost no diversification

The 3 months correlation between Simt and Vanguard is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Simt Large Cap and Vanguard Value Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Value Index and Simt Large 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 Simt Large Cap are associated (or correlated) with Vanguard Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Value Index has no effect on the direction of Simt Large i.e., Simt Large and Vanguard Value go up and down completely randomly.

Pair Corralation between Simt Large and Vanguard Value

Assuming the 90 days horizon Simt Large is expected to generate 1.01 times less return on investment than Vanguard Value. In addition to that, Simt Large is 1.1 times more volatile than Vanguard Value Index. It trades about 0.15 of its total potential returns per unit of risk. Vanguard Value Index is currently generating about 0.16 per unit of volatility. If you would invest  6,634  in Vanguard Value Index on September 3, 2024 and sell it today you would earn a total of  455.00  from holding Vanguard Value Index or generate 6.86% return on investment over 90 days.

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

Simt Large Cap  vs.  Vanguard Value Index

Simt Large Cap

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Simt Large Cap are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Simt Large may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Vanguard Value Index

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Value Index are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Vanguard Value may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Simt Large and Vanguard Value

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

The idea behind Simt Large Cap and Vanguard Value Index 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.