Correlation Between Vanguard Momentum and Vanguard

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

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

Diversification Opportunities for Vanguard Momentum and Vanguard

0.96

Correlation Coefficient

Vanguard Momentum  Vanguard

Almost no diversification

The 3 months correlation between Vanguard and Vanguard is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Momentum Factor and Vanguard SP Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard SP Small and Vanguard Momentum 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 Momentum Factor are associated (or correlated) with Vanguard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard SP Small has no effect on the direction of Vanguard Momentum i.e., Vanguard Momentum and Vanguard go up and down completely randomly.

Pair Corralation between Vanguard Momentum and Vanguard

Given the investment horizon of 90 days Vanguard Momentum Factor is expected to generate 0.81 times more return on investment than Vanguard. However, Vanguard Momentum Factor is 1.23 times less risky than Vanguard. It trades about 0.16 of its potential returns per unit of risk. Vanguard SP Small Cap is currently generating about 0.11 per unit of risk. If you would invest  15,645  in Vanguard Momentum Factor on September 13, 2024 and sell it today you would earn a total of  1,592  from holding Vanguard Momentum Factor or generate 10.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

Vanguard Momentum Factor  vs.  Vanguard SP Small Cap

Vanguard Momentum Factor

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Momentum Factor are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, Vanguard Momentum may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Vanguard SP Small

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard SP Small Cap are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, Vanguard may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Vanguard Momentum and Vanguard

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

The idea behind Vanguard Momentum Factor and Vanguard SP Small 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.

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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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.