Correlation Between Vanguard World and NOW

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

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

Diversification Opportunities for Vanguard World and NOW

0.0

Correlation Coefficient

Vanguard World  NOW

Pay attention - limited upside

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

Pair Corralation between Vanguard World and NOW

Assuming the 90 days trading horizon Vanguard World is expected to generate 6.74 times more return on investment than NOW. However, Vanguard World is 6.74 times more volatile than NOW Inc. It trades about 0.04 of its potential returns per unit of risk. NOW Inc is currently generating about 0.03 per unit of risk. If you would invest  442,249  in Vanguard World on October 5, 2024 and sell it today you would earn a total of  83,752  from holding Vanguard World or generate 18.94% return on investment over 90 days.

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

Vanguard World  vs.  NOW Inc

Vanguard World

Risk-Adjusted Performance

0 of 100

Very Weak

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

NOW Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NOW Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, NOW 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 World and NOW

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

The idea behind Vanguard World and NOW Inc 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.