Correlation Between Vanguard Mid and Fam Value

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

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

Diversification Opportunities for Vanguard Mid and Fam Value

0.81

Correlation Coefficient

Vanguard Mid  Fam Value

Very poor diversification

The 3 months correlation between Vanguard and Fam is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Mid Cap Index and Fam Value Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fam Value Fund and Vanguard Mid 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 Mid Cap Index are associated (or correlated) with Fam Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fam Value Fund has no effect on the direction of Vanguard Mid i.e., Vanguard Mid and Fam Value go up and down completely randomly.

Pair Corralation between Vanguard Mid and Fam Value

Assuming the 90 days horizon Vanguard Mid Cap Index is expected to generate 0.65 times more return on investment than Fam Value. However, Vanguard Mid Cap Index is 1.53 times less risky than Fam Value. It trades about -0.04 of its potential returns per unit of risk. Fam Value Fund is currently generating about -0.13 per unit of risk. If you would invest  34,432  in Vanguard Mid Cap Index on October 22, 2024 and sell it today you would lose (525.00) from holding Vanguard Mid Cap Index or give up 1.52% of portfolio value over 90 days.

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

Vanguard Mid Cap Index  vs.  Fam Value Fund

Vanguard Mid Cap

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Mid Cap Index are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Vanguard Mid is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fam Value Fund

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fam Value Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Fam 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 Mid and Fam Value

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

The idea behind Vanguard Mid Cap Index and Fam 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.