Correlation Between Ultrasmall-cap Profund and Vanguard Lifestrategy

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

By analyzing existing cross correlation between Ultrasmall Cap Profund Ultrasmall Cap and Vanguard Lifestrategy Growth, you can compare the effects of market volatilities on Ultrasmall-cap Profund and Vanguard Lifestrategy 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 Ultrasmall-cap Profund with a short position of Vanguard Lifestrategy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ultrasmall-cap Profund and Vanguard Lifestrategy.

Diversification Opportunities for Ultrasmall-cap Profund and Vanguard Lifestrategy

0.58

Correlation Coefficient

Ultrasmall-cap Profund  Vanguard Lifestrategy

Very weak diversification

The 3 months correlation between Ultrasmall-cap and Vanguard is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Ultrasmall Cap Profund Ultrasm and Vanguard Lifestrategy Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Lifestrategy and Ultrasmall-cap Profund 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 Ultrasmall Cap Profund Ultrasmall Cap are associated (or correlated) with Vanguard Lifestrategy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Lifestrategy has no effect on the direction of Ultrasmall-cap Profund i.e., Ultrasmall-cap Profund and Vanguard Lifestrategy go up and down completely randomly.

Pair Corralation between Ultrasmall-cap Profund and Vanguard Lifestrategy

Assuming the 90 days horizon Ultrasmall Cap Profund Ultrasmall Cap is expected to under-perform the Vanguard Lifestrategy. In addition to that, Ultrasmall-cap Profund is 2.69 times more volatile than Vanguard Lifestrategy Growth. It trades about -0.11 of its total potential returns per unit of risk. Vanguard Lifestrategy Growth is currently generating about -0.06 per unit of volatility. If you would invest  4,649  in Vanguard Lifestrategy Growth on December 25, 2024 and sell it today you would lose (154.00) from holding Vanguard Lifestrategy Growth or give up 3.31% of portfolio value over 90 days.

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

Ultrasmall Cap Profund Ultrasm  vs.  Vanguard Lifestrategy Growth

Ultrasmall Cap Profund

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ultrasmall Cap Profund Ultrasmall Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's forward indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Vanguard Lifestrategy

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Ultrasmall-cap Profund and Vanguard Lifestrategy

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

The idea behind Ultrasmall Cap Profund Ultrasmall Cap and Vanguard Lifestrategy Growth 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.