Correlation Between Vanguard 500 and Intrepid Income

Can any of the company-specific risk be diversified away by investing in both Vanguard 500 and Intrepid Income 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 Intrepid Income 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 Intrepid Income Fund, you can compare the effects of market volatilities on Vanguard 500 and Intrepid Income 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 Intrepid Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard 500 and Intrepid Income.

Diversification Opportunities for Vanguard 500 and Intrepid Income

0.26

Correlation Coefficient

Vanguard 500  Intrepid Income

Modest diversification

The 3 months correlation between Vanguard and Intrepid is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard 500 Index and Intrepid Income Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intrepid Income 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 Intrepid Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intrepid Income has no effect on the direction of Vanguard 500 i.e., Vanguard 500 and Intrepid Income go up and down completely randomly.

Pair Corralation between Vanguard 500 and Intrepid Income

Assuming the 90 days horizon Vanguard 500 Index is expected to under-perform the Intrepid Income. In addition to that, Vanguard 500 is 6.98 times more volatile than Intrepid Income Fund. It trades about -0.06 of its total potential returns per unit of risk. Intrepid Income Fund is currently generating about 0.28 per unit of volatility. If you would invest  889.00  in Intrepid Income Fund on December 5, 2024 and sell it today you would earn a total of  19.00  from holding Intrepid Income Fund or generate 2.14% return on investment over 90 days.

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

Vanguard 500 Index  vs.  Intrepid Income Fund

Vanguard 500 Index

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard 500 Index has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Vanguard 500 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Intrepid Income

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Intrepid Income Fund are ranked lower than 21 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Intrepid Income 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 500 and Intrepid Income

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

The idea behind Vanguard 500 Index and Intrepid Income 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.