Correlation Between Vanguard California and Victory High

Can any of the company-specific risk be diversified away by investing in both Vanguard California and Victory High 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 Victory High 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 Victory High Income, you can compare the effects of market volatilities on Vanguard California and Victory High 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 Victory High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard California and Victory High.

Diversification Opportunities for Vanguard California and Victory High

0.95

Correlation Coefficient

Vanguard California  Victory High

Almost no diversification

The 3 months correlation between VANGUARD and Victory is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard California Long Term and Victory High Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Victory High Income 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 Victory High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Victory High Income has no effect on the direction of Vanguard California i.e., Vanguard California and Victory High go up and down completely randomly.

Pair Corralation between Vanguard California and Victory High

Assuming the 90 days horizon Vanguard California Long Term is expected to under-perform the Victory High. But the mutual fund apears to be less risky and, when comparing its historical volatility, Vanguard California Long Term is 1.5 times less risky than Victory High. The mutual fund trades about -0.06 of its potential returns per unit of risk. The Victory High Income is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  944.00  in Victory High Income on December 30, 2024 and sell it today you would lose (5.00) from holding Victory High Income or give up 0.53% of portfolio value over 90 days.

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

Vanguard California Long Term  vs.  Victory High Income

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.

Victory High Income

Risk-Adjusted Performance

Very Weak

Over the last 90 days Victory High Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Victory High 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 Victory High

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

The idea behind Vanguard California Long Term and Victory High Income 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.