Correlation Between Vanguard California and Ave Maria

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

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

Diversification Opportunities for Vanguard California and Ave Maria

0.58

Correlation Coefficient

Vanguard California  Ave Maria

Very weak diversification

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

Pair Corralation between Vanguard California and Ave Maria

Assuming the 90 days horizon Vanguard California is expected to generate 1.5 times less return on investment than Ave Maria. In addition to that, Vanguard California is 1.13 times more volatile than Ave Maria Bond. It trades about 0.06 of its total potential returns per unit of risk. Ave Maria Bond is currently generating about 0.11 per unit of volatility. If you would invest  1,085  in Ave Maria Bond on December 2, 2024 and sell it today you would earn a total of  148.00  from holding Ave Maria Bond or generate 13.64% return on investment over 90 days.

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

Vanguard California Long Term  vs.  Ave Maria Bond

Vanguard California

Risk-Adjusted Performance

Very Weak

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

Ave Maria Bond

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ave Maria Bond has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Ave Maria 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 California and Ave Maria

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

The idea behind Vanguard California Long Term and Ave Maria Bond 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.