Correlation Between Vanguard Short and FundX Investment

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

By analyzing existing cross correlation between Vanguard Short Term Treasury and FundX Investment Trust, you can compare the effects of market volatilities on Vanguard Short and FundX Investment 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 Short with a short position of FundX Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Short and FundX Investment.

Diversification Opportunities for Vanguard Short and FundX Investment

0.32

Correlation Coefficient

Vanguard Short  FundX Investment

Weak diversification

The 3 months correlation between Vanguard and FundX is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Short Term Treasury and FundX Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FundX Investment Trust and Vanguard Short 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 Short Term Treasury are associated (or correlated) with FundX Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FundX Investment Trust has no effect on the direction of Vanguard Short i.e., Vanguard Short and FundX Investment go up and down completely randomly.

Pair Corralation between Vanguard Short and FundX Investment

Given the investment horizon of 90 days Vanguard Short Term Treasury is expected to generate 0.26 times more return on investment than FundX Investment. However, Vanguard Short Term Treasury is 3.9 times less risky than FundX Investment. It trades about 0.29 of its potential returns per unit of risk. FundX Investment Trust is currently generating about 0.01 per unit of risk. If you would invest  5,783  in Vanguard Short Term Treasury on December 2, 2024 and sell it today you would earn a total of  80.00  from holding Vanguard Short Term Treasury or generate 1.38% return on investment over 90 days.

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

Vanguard Short Term Treasury  vs.  FundX Investment Trust

Vanguard Short Term

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Short Term Treasury are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Vanguard Short is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

FundX Investment Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days FundX Investment Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong essential indicators, FundX Investment is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vanguard Short and FundX Investment

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

The idea behind Vanguard Short Term Treasury and FundX Investment Trust 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.