Correlation Between Timothy Plan and Vanguard Multifactor

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

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

Diversification Opportunities for Timothy Plan and Vanguard Multifactor

0.91

Correlation Coefficient

Timothy Plan  Vanguard Multifactor

Almost no diversification

The 3 months correlation between Timothy and Vanguard is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Timothy Plan LargeMid and Vanguard Multifactor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Multifactor and Timothy Plan 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 Timothy Plan LargeMid are associated (or correlated) with Vanguard Multifactor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Multifactor has no effect on the direction of Timothy Plan i.e., Timothy Plan and Vanguard Multifactor go up and down completely randomly.

Pair Corralation between Timothy Plan and Vanguard Multifactor

Given the investment horizon of 90 days Timothy Plan LargeMid is expected to generate 0.9 times more return on investment than Vanguard Multifactor. However, Timothy Plan LargeMid is 1.11 times less risky than Vanguard Multifactor. It trades about -0.02 of its potential returns per unit of risk. Vanguard Multifactor is currently generating about -0.05 per unit of risk. If you would invest  4,284  in Timothy Plan LargeMid on December 28, 2024 and sell it today you would lose (63.00) from holding Timothy Plan LargeMid or give up 1.47% of portfolio value over 90 days.

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

Timothy Plan LargeMid  vs.  Vanguard Multifactor

Timothy Plan LargeMid

Risk-Adjusted Performance

Very Weak

Over the last 90 days Timothy Plan LargeMid has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, Timothy Plan is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Vanguard Multifactor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Multifactor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, Vanguard Multifactor is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Timothy Plan and Vanguard Multifactor

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

The idea behind Timothy Plan LargeMid and Vanguard Multifactor 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.