Correlation Between Vanguard Emerging and Semiconductor Ultrasector

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

By analyzing existing cross correlation between Vanguard Emerging Markets and Semiconductor Ultrasector Profund, you can compare the effects of market volatilities on Vanguard Emerging and Semiconductor Ultrasector 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 Emerging with a short position of Semiconductor Ultrasector. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Emerging and Semiconductor Ultrasector.

Diversification Opportunities for Vanguard Emerging and Semiconductor Ultrasector

-0.76

Correlation Coefficient

Vanguard Emerging  Semiconductor Ultrasector

Pay attention - limited upside

The 3 months correlation between Vanguard and Semiconductor is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Emerging Markets and Semiconductor Ultrasector Prof in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Semiconductor Ultrasector and Vanguard Emerging 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 Emerging Markets are associated (or correlated) with Semiconductor Ultrasector. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Semiconductor Ultrasector has no effect on the direction of Vanguard Emerging i.e., Vanguard Emerging and Semiconductor Ultrasector go up and down completely randomly.

Pair Corralation between Vanguard Emerging and Semiconductor Ultrasector

Assuming the 90 days horizon Vanguard Emerging Markets is expected to generate 0.05 times more return on investment than Semiconductor Ultrasector. However, Vanguard Emerging Markets is 18.69 times less risky than Semiconductor Ultrasector. It trades about 0.18 of its potential returns per unit of risk. Semiconductor Ultrasector Profund is currently generating about -0.09 per unit of risk. If you would invest  2,298  in Vanguard Emerging Markets on December 25, 2024 and sell it today you would earn a total of  68.00  from holding Vanguard Emerging Markets or generate 2.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

Vanguard Emerging Markets  vs.  Semiconductor Ultrasector Prof

Vanguard Emerging Markets

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Emerging Markets are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental drivers, Vanguard Emerging is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Semiconductor Ultrasector

Risk-Adjusted Performance

Very Weak

Over the last 90 days Semiconductor Ultrasector Profund has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's forward indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Vanguard Emerging and Semiconductor Ultrasector

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

The idea behind Vanguard Emerging Markets and Semiconductor Ultrasector Profund 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.