Correlation Between Vanguard Information and Emerald Growth

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

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

Diversification Opportunities for Vanguard Information and Emerald Growth

0.86

Correlation Coefficient

Vanguard Information  Emerald Growth

Very poor diversification

The 3 months correlation between Vanguard and Emerald is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Information Technolog and Emerald Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerald Growth and Vanguard Information 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 Information Technology are associated (or correlated) with Emerald Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emerald Growth has no effect on the direction of Vanguard Information i.e., Vanguard Information and Emerald Growth go up and down completely randomly.

Pair Corralation between Vanguard Information and Emerald Growth

Assuming the 90 days horizon Vanguard Information Technology is expected to under-perform the Emerald Growth. In addition to that, Vanguard Information is 1.1 times more volatile than Emerald Growth Fund. It trades about -0.11 of its total potential returns per unit of risk. Emerald Growth Fund is currently generating about -0.12 per unit of volatility. If you would invest  2,585  in Emerald Growth Fund on December 21, 2024 and sell it today you would lose (292.00) from holding Emerald Growth Fund or give up 11.3% of portfolio value over 90 days.

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

Vanguard Information Technolog  vs.  Emerald Growth Fund

Vanguard Information

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Information Technology has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Emerald Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Emerald Growth Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Vanguard Information and Emerald Growth

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

The idea behind Vanguard Information Technology and Emerald Growth 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.