Correlation Between Vanguard Emerging and Seafarer Overseas

Can any of the company-specific risk be diversified away by investing in both Vanguard Emerging and Seafarer Overseas 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 Seafarer Overseas 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 Seafarer Overseas Value, you can compare the effects of market volatilities on Vanguard Emerging and Seafarer Overseas 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 Seafarer Overseas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Emerging and Seafarer Overseas.

Diversification Opportunities for Vanguard Emerging and Seafarer Overseas

0.75

Correlation Coefficient

Vanguard Emerging  Seafarer Overseas

Poor diversification

The 3 months correlation between Vanguard and Seafarer is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Emerging Markets and Seafarer Overseas Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seafarer Overseas Value 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 Seafarer Overseas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seafarer Overseas Value has no effect on the direction of Vanguard Emerging i.e., Vanguard Emerging and Seafarer Overseas go up and down completely randomly.

Pair Corralation between Vanguard Emerging and Seafarer Overseas

Assuming the 90 days horizon Vanguard Emerging is expected to generate 3.91 times less return on investment than Seafarer Overseas. In addition to that, Vanguard Emerging is 1.85 times more volatile than Seafarer Overseas Value. It trades about 0.03 of its total potential returns per unit of risk. Seafarer Overseas Value is currently generating about 0.2 per unit of volatility. If you would invest  1,299  in Seafarer Overseas Value on December 4, 2024 and sell it today you would earn a total of  25.00  from holding Seafarer Overseas Value or generate 1.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

Vanguard Emerging Markets  vs.  Seafarer Overseas Value

Vanguard Emerging Markets

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Emerging Markets has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Vanguard Emerging is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Seafarer Overseas Value

Risk-Adjusted Performance

Very Weak

Over the last 90 days Seafarer Overseas Value has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong essential indicators, Seafarer Overseas is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vanguard Emerging and Seafarer Overseas

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

The idea behind Vanguard Emerging Markets and Seafarer Overseas Value 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.