Correlation Between Vanguard FTSE and Stone Ridge

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

By analyzing existing cross correlation between Vanguard FTSE Developed and Stone Ridge 2058, you can compare the effects of market volatilities on Vanguard FTSE and Stone Ridge 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 FTSE with a short position of Stone Ridge. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard FTSE and Stone Ridge.

Diversification Opportunities for Vanguard FTSE and Stone Ridge

0.41

Correlation Coefficient

Vanguard FTSE  Stone Ridge

Very weak diversification

The 3 months correlation between Vanguard and Stone is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard FTSE Developed and Stone Ridge 2058 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stone Ridge 2058 and Vanguard FTSE 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 FTSE Developed are associated (or correlated) with Stone Ridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stone Ridge 2058 has no effect on the direction of Vanguard FTSE i.e., Vanguard FTSE and Stone Ridge go up and down completely randomly.

Pair Corralation between Vanguard FTSE and Stone Ridge

Considering the 90-day investment horizon Vanguard FTSE is expected to generate 1.74 times less return on investment than Stone Ridge. In addition to that, Vanguard FTSE is 1.1 times more volatile than Stone Ridge 2058. It trades about 0.15 of its total potential returns per unit of risk. Stone Ridge 2058 is currently generating about 0.29 per unit of volatility. If you would invest  15,694  in Stone Ridge 2058 on December 2, 2024 and sell it today you would earn a total of  632.00  from holding Stone Ridge 2058 or generate 4.03% return on investment over 90 days.

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

Vanguard FTSE Developed  vs.  Stone Ridge 2058

Vanguard FTSE Developed

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard FTSE Developed are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, Vanguard FTSE is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Stone Ridge 2058

Risk-Adjusted Performance

Very Weak

Over the last 90 days Stone Ridge 2058 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Stone Ridge is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Vanguard FTSE and Stone Ridge

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

The idea behind Vanguard FTSE Developed and Stone Ridge 2058 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.