Correlation Between Vanguard Industrials and Transportation Portfolio

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

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

Diversification Opportunities for Vanguard Industrials and Transportation Portfolio

0.87

Correlation Coefficient

Vanguard Industrials  Transportation Portfolio

Very poor diversification

The 3 months correlation between Vanguard and Transportation is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Industrials Index and Transportation Portfolio Trans in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transportation Portfolio and Vanguard Industrials 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 Industrials Index are associated (or correlated) with Transportation Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transportation Portfolio has no effect on the direction of Vanguard Industrials i.e., Vanguard Industrials and Transportation Portfolio go up and down completely randomly.

Pair Corralation between Vanguard Industrials and Transportation Portfolio

Assuming the 90 days horizon Vanguard Industrials Index is expected to generate 0.9 times more return on investment than Transportation Portfolio. However, Vanguard Industrials Index is 1.12 times less risky than Transportation Portfolio. It trades about -0.03 of its potential returns per unit of risk. Transportation Portfolio Transportation is currently generating about -0.06 per unit of risk. If you would invest  13,326  in Vanguard Industrials Index on December 26, 2024 and sell it today you would lose (331.00) from holding Vanguard Industrials Index or give up 2.48% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.36%
Values	Daily Returns

Vanguard Industrials Index  vs.  Transportation Portfolio Trans

Vanguard Industrials

Risk-Adjusted Performance

Very Weak

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

Transportation Portfolio

Risk-Adjusted Performance

Very Weak

Over the last 90 days Transportation Portfolio Transportation has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Transportation Portfolio 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 Industrials and Transportation Portfolio

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

The idea behind Vanguard Industrials Index and Transportation Portfolio Transportation 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.