Correlation Between Vanguard Total and Mesirow Enhanced

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

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

Diversification Opportunities for Vanguard Total and Mesirow Enhanced

0.99

Correlation Coefficient

Vanguard Total  Mesirow Enhanced

No risk reduction

The 3 months correlation between Vanguard and Mesirow is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Bond and Mesirow Enhanced Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mesirow Enhanced Core and Vanguard Total 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 Total Bond are associated (or correlated) with Mesirow Enhanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mesirow Enhanced Core has no effect on the direction of Vanguard Total i.e., Vanguard Total and Mesirow Enhanced go up and down completely randomly.

Pair Corralation between Vanguard Total and Mesirow Enhanced

Assuming the 90 days horizon Vanguard Total Bond is expected to under-perform the Mesirow Enhanced. In addition to that, Vanguard Total is 1.05 times more volatile than Mesirow Enhanced Core. It trades about -0.03 of its total potential returns per unit of risk. Mesirow Enhanced Core is currently generating about 0.0 per unit of volatility. If you would invest  897.00  in Mesirow Enhanced Core on September 3, 2024 and sell it today you would lose (1.00) from holding Mesirow Enhanced Core or give up 0.11% of portfolio value over 90 days.

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

Vanguard Total Bond  vs.  Mesirow Enhanced Core

Vanguard Total Bond

Risk-Adjusted Performance

0 of 100

Very Weak

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

Mesirow Enhanced Core

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Vanguard Total and Mesirow Enhanced

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

The idea behind Vanguard Total Bond and Mesirow Enhanced Core 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.