Correlation Between Vanguard Value and Vanguard Minimum

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

Diversification Opportunities for Vanguard Value and Vanguard Minimum

0.0

Correlation Coefficient

Vanguard Value  Vanguard Minimum

Pay attention - limited upside

The 3 months correlation between Vanguard and Vanguard is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Value Factor and Vanguard Minimum Volatility in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Minimum Vol 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 Vanguard Minimum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Minimum Vol has no effect on the direction of Vanguard Value i.e., Vanguard Value and Vanguard Minimum go up and down completely randomly.

Pair Corralation between Vanguard Value and Vanguard Minimum

Given the investment horizon of 90 days Vanguard Value Factor is expected to under-perform the Vanguard Minimum. In addition to that, Vanguard Value is 1.49 times more volatile than Vanguard Minimum Volatility. It trades about -0.04 of its total potential returns per unit of risk. Vanguard Minimum Volatility is currently generating about 0.11 per unit of volatility. If you would invest  12,006  in Vanguard Minimum Volatility on December 30, 2024 and sell it today you would earn a total of  551.00  from holding Vanguard Minimum Volatility or generate 4.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Vanguard Value Factor  vs.  Vanguard Minimum Volatility

Vanguard Value Factor

Risk-Adjusted Performance

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.

Vanguard Minimum Vol

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Minimum Volatility are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable primary indicators, Vanguard Minimum is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Vanguard Value and Vanguard Minimum

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

The idea behind Vanguard Value Factor and Vanguard Minimum Volatility 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.

Check out your portfolio center.

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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.