Correlation Between Vanguard 500 and Aegis Value

Can any of the company-specific risk be diversified away by investing in both Vanguard 500 and Aegis Value 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 500 and Aegis Value into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Vanguard 500 Index and Aegis Value Fund, you can compare the effects of market volatilities on Vanguard 500 and Aegis Value 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 500 with a short position of Aegis Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard 500 and Aegis Value.

Diversification Opportunities for Vanguard 500 and Aegis Value

0.76

Correlation Coefficient

Vanguard 500  Aegis Value

Poor diversification

The 3 months correlation between Vanguard and Aegis is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard 500 Index and Aegis Value Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aegis Value Fund and Vanguard 500 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 500 Index are associated (or correlated) with Aegis Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aegis Value Fund has no effect on the direction of Vanguard 500 i.e., Vanguard 500 and Aegis Value go up and down completely randomly.

Pair Corralation between Vanguard 500 and Aegis Value

Assuming the 90 days horizon Vanguard 500 Index is expected to generate 0.69 times more return on investment than Aegis Value. However, Vanguard 500 Index is 1.44 times less risky than Aegis Value. It trades about 0.2 of its potential returns per unit of risk. Aegis Value Fund is currently generating about 0.12 per unit of risk. If you would invest  50,978  in Vanguard 500 Index on September 2, 2024 and sell it today you would earn a total of  4,801  from holding Vanguard 500 Index or generate 9.42% return on investment over 90 days.

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

Vanguard 500 Index  vs.  Aegis Value Fund

Vanguard 500 Index

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard 500 Index are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Vanguard 500 may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Aegis Value Fund

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aegis Value Fund are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak essential indicators, Aegis Value may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Vanguard 500 and Aegis Value

The main advantage of trading using opposite Vanguard 500 and Aegis Value positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard 500 position performs unexpectedly, Aegis Value 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 Aegis Value will offset losses from the drop in Aegis Value's long position.

The idea behind Vanguard 500 Index and Aegis Value Fund 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.