Correlation Between Vanguard Financials and Nuveen Mid

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

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

Diversification Opportunities for Vanguard Financials and Nuveen Mid

0.89

Correlation Coefficient

Vanguard Financials  Nuveen Mid

Very poor diversification

The 3 months correlation between Vanguard and Nuveen is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Financials Index and Nuveen Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuveen Mid Cap and Vanguard Financials 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 Financials Index are associated (or correlated) with Nuveen Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuveen Mid Cap has no effect on the direction of Vanguard Financials i.e., Vanguard Financials and Nuveen Mid go up and down completely randomly.

Pair Corralation between Vanguard Financials and Nuveen Mid

Assuming the 90 days horizon Vanguard Financials Index is expected to generate 0.81 times more return on investment than Nuveen Mid. However, Vanguard Financials Index is 1.24 times less risky than Nuveen Mid. It trades about -0.15 of its potential returns per unit of risk. Nuveen Mid Cap is currently generating about -0.21 per unit of risk. If you would invest  6,134  in Vanguard Financials Index on October 9, 2024 and sell it today you would lose (212.00) from holding Vanguard Financials Index or give up 3.46% of portfolio value over 90 days.

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

Vanguard Financials Index  vs.  Nuveen Mid Cap

Vanguard Financials Index

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Financials Index are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Vanguard Financials may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Nuveen Mid Cap

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nuveen Mid Cap are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak essential indicators, Nuveen Mid may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Vanguard Financials and Nuveen Mid

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

The idea behind Vanguard Financials Index and Nuveen Mid Cap 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 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.