Correlation Between Vanguard Value and Formidable Fortress

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

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

Diversification Opportunities for Vanguard Value and Formidable Fortress

0.96

Correlation Coefficient

Vanguard Value  Formidable Fortress

Almost no diversification

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

Pair Corralation between Vanguard Value and Formidable Fortress

Given the investment horizon of 90 days Vanguard Value Factor is expected to under-perform the Formidable Fortress. In addition to that, Vanguard Value is 1.31 times more volatile than Formidable Fortress ETF. It trades about -0.54 of its total potential returns per unit of risk. Formidable Fortress ETF is currently generating about -0.48 per unit of volatility. If you would invest  3,078  in Formidable Fortress ETF on September 24, 2024 and sell it today you would lose (183.00) from holding Formidable Fortress ETF or give up 5.95% of portfolio value over 90 days.

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

Vanguard Value Factor  vs.  Formidable Fortress ETF

Vanguard Value Factor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Value Factor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Vanguard Value is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Formidable Fortress ETF

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Formidable Fortress ETF has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Formidable Fortress is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Vanguard Value and Formidable Fortress

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

The idea behind Vanguard Value Factor and Formidable Fortress ETF 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..