Correlation Between Vanguard Dividend and Siren DIVCON

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

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

Diversification Opportunities for Vanguard Dividend and Siren DIVCON

0.82

Correlation Coefficient

Vanguard Dividend  Siren DIVCON

Very poor diversification

The 3 months correlation between Vanguard and Siren is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Dividend Appreciation and Siren DIVCON Leaders in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Siren DIVCON Leaders and Vanguard Dividend 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 Dividend Appreciation are associated (or correlated) with Siren DIVCON. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Siren DIVCON Leaders has no effect on the direction of Vanguard Dividend i.e., Vanguard Dividend and Siren DIVCON go up and down completely randomly.

Pair Corralation between Vanguard Dividend and Siren DIVCON

Considering the 90-day investment horizon Vanguard Dividend is expected to generate 1.03 times less return on investment than Siren DIVCON. But when comparing it to its historical volatility, Vanguard Dividend Appreciation is 1.3 times less risky than Siren DIVCON. It trades about 0.08 of its potential returns per unit of risk. Siren DIVCON Leaders is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  5,076  in Siren DIVCON Leaders on October 12, 2024 and sell it today you would earn a total of  1,507  from holding Siren DIVCON Leaders or generate 29.69% return on investment over 90 days.

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

Vanguard Dividend Appreciation  vs.  Siren DIVCON Leaders

Vanguard Dividend

Risk-Adjusted Performance

0 of 100

Very Weak

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

Siren DIVCON Leaders

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Siren DIVCON Leaders has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Etf's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

Pair Trading with Vanguard Dividend and Siren DIVCON

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

The idea behind Vanguard Dividend Appreciation and Siren DIVCON Leaders 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.