Correlation Between Versus Capital and Vanguard Total

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

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

Diversification Opportunities for Versus Capital and Vanguard Total

-0.27

Correlation Coefficient

Versus Capital  Vanguard Total

Very good diversification

The 3 months correlation between Versus and Vanguard is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Versus Capital Multi Manager and Vanguard Total Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Total Stock and Versus Capital 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 Versus Capital Multi Manager are associated (or correlated) with Vanguard Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Total Stock has no effect on the direction of Versus Capital i.e., Versus Capital and Vanguard Total go up and down completely randomly.

Pair Corralation between Versus Capital and Vanguard Total

Assuming the 90 days horizon Versus Capital is expected to generate 13.06 times less return on investment than Vanguard Total. But when comparing it to its historical volatility, Versus Capital Multi Manager is 4.8 times less risky than Vanguard Total. It trades about 0.08 of its potential returns per unit of risk. Vanguard Total Stock is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  13,216  in Vanguard Total Stock on August 31, 2024 and sell it today you would earn a total of  1,298  from holding Vanguard Total Stock or generate 9.82% return on investment over 90 days.

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

Versus Capital Multi Manager  vs.  Vanguard Total Stock

Versus Capital Multi

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Versus Capital Multi Manager are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Versus Capital is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Vanguard Total Stock

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Total Stock are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Vanguard Total may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Versus Capital and Vanguard Total

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

The idea behind Versus Capital Multi Manager and Vanguard Total Stock 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.