Correlation Between Vanguard Small and ETRACS Quarterly

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

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

Diversification Opportunities for Vanguard Small and ETRACS Quarterly

0.44

Correlation Coefficient

Vanguard Small  ETRACS Quarterly

Very weak diversification

The 3 months correlation between Vanguard and ETRACS is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Index and ETRACS Quarterly Pay in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETRACS Quarterly Pay and Vanguard Small 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 Vanguard Small Cap Index are associated (or correlated) with ETRACS Quarterly. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETRACS Quarterly Pay has no effect on the direction of Vanguard Small i.e., Vanguard Small and ETRACS Quarterly go up and down completely randomly.

Pair Corralation between Vanguard Small and ETRACS Quarterly

Allowing for the 90-day total investment horizon Vanguard Small Cap Index is expected to under-perform the ETRACS Quarterly. But the etf apears to be less risky and, when comparing its historical volatility, Vanguard Small Cap Index is 1.49 times less risky than ETRACS Quarterly. The etf trades about -0.08 of its potential returns per unit of risk. The ETRACS Quarterly Pay is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  3,151  in ETRACS Quarterly Pay on December 28, 2024 and sell it today you would earn a total of  97.00  from holding ETRACS Quarterly Pay or generate 3.08% return on investment over 90 days.

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

Vanguard Small Cap Index  vs.  ETRACS Quarterly Pay

Vanguard Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Small Cap Index has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Vanguard Small is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

ETRACS Quarterly Pay

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ETRACS Quarterly Pay are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental indicators, ETRACS Quarterly is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vanguard Small and ETRACS Quarterly

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

The idea behind Vanguard Small Cap Index and ETRACS Quarterly Pay 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.