Correlation Between Vanguard Growth and Frank Value

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

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

Diversification Opportunities for Vanguard Growth and Frank Value

0.47

Correlation Coefficient

Vanguard Growth  Frank Value

Very weak diversification

The 3 months correlation between Vanguard and Frank is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Growth Index and Frank Value Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Frank Value Fund and Vanguard Growth 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 Growth Index are associated (or correlated) with Frank Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Frank Value Fund has no effect on the direction of Vanguard Growth i.e., Vanguard Growth and Frank Value go up and down completely randomly.

Pair Corralation between Vanguard Growth and Frank Value

Assuming the 90 days horizon Vanguard Growth Index is expected to generate 1.22 times more return on investment than Frank Value. However, Vanguard Growth is 1.22 times more volatile than Frank Value Fund. It trades about -0.05 of its potential returns per unit of risk. Frank Value Fund is currently generating about -0.35 per unit of risk. If you would invest  21,610  in Vanguard Growth Index on October 11, 2024 and sell it today you would lose (309.00) from holding Vanguard Growth Index or give up 1.43% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Vanguard Growth Index  vs.  Frank Value Fund

Vanguard Growth Index

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Growth Index are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Vanguard Growth may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Frank Value Fund

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Frank Value Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward-looking signals, Frank Value 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 Growth and Frank Value

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

The idea behind Vanguard Growth Index and Frank Value Fund 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.