Correlation Between Vanguard Consumer and Themes European

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

By analyzing existing cross correlation between Vanguard Consumer Discretionary and Themes European Luxury, you can compare the effects of market volatilities on Vanguard Consumer and Themes European 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 Consumer with a short position of Themes European. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Consumer and Themes European.

Diversification Opportunities for Vanguard Consumer and Themes European

0.42

Correlation Coefficient

Vanguard Consumer  Themes European

Very weak diversification

The 3 months correlation between Vanguard and Themes is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Consumer Discretionar and Themes European Luxury in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Themes European Luxury and Vanguard Consumer 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 Consumer Discretionary are associated (or correlated) with Themes European. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Themes European Luxury has no effect on the direction of Vanguard Consumer i.e., Vanguard Consumer and Themes European go up and down completely randomly.

Pair Corralation between Vanguard Consumer and Themes European

Considering the 90-day investment horizon Vanguard Consumer Discretionary is expected to under-perform the Themes European. In addition to that, Vanguard Consumer is 1.29 times more volatile than Themes European Luxury. It trades about -0.15 of its total potential returns per unit of risk. Themes European Luxury is currently generating about -0.09 per unit of volatility. If you would invest  2,230  in Themes European Luxury on December 29, 2024 and sell it today you would lose (142.00) from holding Themes European Luxury or give up 6.37% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Vanguard Consumer Discretionar  vs.  Themes European Luxury

Vanguard Consumer

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Consumer Discretionary has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Etf's fundamental indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the ETF retail investors.

Themes European Luxury

Risk-Adjusted Performance

Very Weak

Over the last 90 days Themes European Luxury has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Themes European is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Vanguard Consumer and Themes European

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

The idea behind Vanguard Consumer Discretionary and Themes European Luxury 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.