Correlation Between Vanguard Energy and Defiance Next

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

By analyzing existing cross correlation between Vanguard Energy Index and Defiance Next Gen, you can compare the effects of market volatilities on Vanguard Energy and Defiance Next 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 Energy with a short position of Defiance Next. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Energy and Defiance Next.

Diversification Opportunities for Vanguard Energy and Defiance Next

-0.19

Correlation Coefficient

Vanguard Energy  Defiance Next

Good diversification

The 3 months correlation between Vanguard and Defiance is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Energy Index and Defiance Next Gen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Defiance Next Gen and Vanguard Energy 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 Energy Index are associated (or correlated) with Defiance Next. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Defiance Next Gen has no effect on the direction of Vanguard Energy i.e., Vanguard Energy and Defiance Next go up and down completely randomly.

Pair Corralation between Vanguard Energy and Defiance Next

Considering the 90-day investment horizon Vanguard Energy Index is expected to generate 0.56 times more return on investment than Defiance Next. However, Vanguard Energy Index is 1.78 times less risky than Defiance Next. It trades about 0.11 of its potential returns per unit of risk. Defiance Next Gen is currently generating about -0.15 per unit of risk. If you would invest  11,878  in Vanguard Energy Index on December 29, 2024 and sell it today you would earn a total of  962.00  from holding Vanguard Energy Index or generate 8.1% return on investment over 90 days.

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

Vanguard Energy Index  vs.  Defiance Next Gen

Vanguard Energy Index

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Energy Index are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent fundamental indicators, Vanguard Energy may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Defiance Next Gen

Risk-Adjusted Performance

Very Weak

Over the last 90 days Defiance Next Gen has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Etf's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the ETF investors.

Pair Trading with Vanguard Energy and Defiance Next

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

The idea behind Vanguard Energy Index and Defiance Next Gen 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.