Correlation Between Vanguard Financials and Themes Global

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

Diversification Opportunities for Vanguard Financials and Themes Global

0.19

Correlation Coefficient

Vanguard Financials  Themes Global

Average diversification

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

Pair Corralation between Vanguard Financials and Themes Global

Considering the 90-day investment horizon Vanguard Financials is expected to generate 17.05 times less return on investment than Themes Global. But when comparing it to its historical volatility, Vanguard Financials Index is 1.08 times less risky than Themes Global. It trades about 0.01 of its potential returns per unit of risk. Themes Global Systemically is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  3,322  in Themes Global Systemically on December 29, 2024 and sell it today you would earn a total of  475.00  from holding Themes Global Systemically or generate 14.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Vanguard Financials Index  vs.  Themes Global Systemically

Vanguard Financials Index

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Financials Index has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, Vanguard Financials is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Themes Global System

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Themes Global Systemically are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain forward indicators, Themes Global sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vanguard Financials and Themes Global

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

The idea behind Vanguard Financials Index and Themes Global Systemically 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.