Correlation Between Vanguard and Formidable Fortress

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

By analyzing existing cross correlation between Vanguard SP Small Cap and Formidable Fortress ETF, you can compare the effects of market volatilities on Vanguard and Formidable Fortress 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 with a short position of Formidable Fortress. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard and Formidable Fortress.

Diversification Opportunities for Vanguard and Formidable Fortress

0.84

Correlation Coefficient

Vanguard  Formidable Fortress

Very poor diversification

The 3 months correlation between Vanguard and Formidable is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard SP Small Cap and Formidable Fortress ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Formidable Fortress ETF and Vanguard 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 SP Small Cap are associated (or correlated) with Formidable Fortress. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Formidable Fortress ETF has no effect on the direction of Vanguard i.e., Vanguard and Formidable Fortress go up and down completely randomly.

Pair Corralation between Vanguard and Formidable Fortress

Given the investment horizon of 90 days Vanguard SP Small Cap is expected to generate 1.3 times more return on investment than Formidable Fortress. However, Vanguard is 1.3 times more volatile than Formidable Fortress ETF. It trades about -0.01 of its potential returns per unit of risk. Formidable Fortress ETF is currently generating about -0.21 per unit of risk. If you would invest  12,301  in Vanguard SP Small Cap on September 20, 2024 and sell it today you would lose (34.00) from holding Vanguard SP Small Cap or give up 0.28% of portfolio value over 90 days.

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

Vanguard SP Small Cap  vs.  Formidable Fortress ETF

Vanguard SP Small

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard SP Small Cap are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Vanguard is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Formidable Fortress ETF

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Vanguard and Formidable Fortress

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

The idea behind Vanguard SP Small Cap and Formidable Fortress ETF 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.