Correlation Between Vanguard Mid-cap and Vaughan Nelson

Can any of the company-specific risk be diversified away by investing in both Vanguard Mid-cap and Vaughan Nelson 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-cap and Vaughan Nelson 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 Vaughan Nelson Value, you can compare the effects of market volatilities on Vanguard Mid-cap and Vaughan Nelson 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-cap with a short position of Vaughan Nelson. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Mid-cap and Vaughan Nelson.

Diversification Opportunities for Vanguard Mid-cap and Vaughan Nelson

0.99

Correlation Coefficient

Vanguard Mid-cap  Vaughan Nelson

No risk reduction

The 3 months correlation between VANGUARD and Vaughan is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Mid Cap Index and Vaughan Nelson Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vaughan Nelson Value and Vanguard Mid-cap 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 Vaughan Nelson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vaughan Nelson Value has no effect on the direction of Vanguard Mid-cap i.e., Vanguard Mid-cap and Vaughan Nelson go up and down completely randomly.

Pair Corralation between Vanguard Mid-cap and Vaughan Nelson

Assuming the 90 days horizon Vanguard Mid-cap is expected to generate 1.43 times less return on investment than Vaughan Nelson. But when comparing it to its historical volatility, Vanguard Mid Cap Index is 1.43 times less risky than Vaughan Nelson. It trades about 0.27 of its potential returns per unit of risk. Vaughan Nelson Value is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  2,518  in Vaughan Nelson Value on September 4, 2024 and sell it today you would earn a total of  449.00  from holding Vaughan Nelson Value or generate 17.83% return on investment over 90 days.

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

Vanguard Mid Cap Index  vs.  Vaughan Nelson Value

Vanguard Mid Cap

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Mid Cap Index are ranked lower than 20 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Vanguard Mid-cap may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Vaughan Nelson Value

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vaughan Nelson Value are ranked lower than 20 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Vaughan Nelson showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vanguard Mid-cap and Vaughan Nelson

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

The idea behind Vanguard Mid Cap Index and Vaughan Nelson Value 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.