Correlation Between Vanguard Total and Versus Capital

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

By analyzing existing cross correlation between Vanguard Total Stock and Versus Capital Multi Manager, you can compare the effects of market volatilities on Vanguard Total and Versus Capital 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 Total with a short position of Versus Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Total and Versus Capital.

Diversification Opportunities for Vanguard Total and Versus Capital

-0.38

Correlation Coefficient

Vanguard Total  Versus Capital

Very good diversification

The 3 months correlation between Vanguard and Versus is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Stock and Versus Capital Multi Manager in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Versus Capital Multi and Vanguard Total 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 Total Stock are associated (or correlated) with Versus Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Versus Capital Multi has no effect on the direction of Vanguard Total i.e., Vanguard Total and Versus Capital go up and down completely randomly.

Pair Corralation between Vanguard Total and Versus Capital

Assuming the 90 days horizon Vanguard Total Stock is expected to under-perform the Versus Capital. In addition to that, Vanguard Total is 5.17 times more volatile than Versus Capital Multi Manager. It trades about -0.09 of its total potential returns per unit of risk. Versus Capital Multi Manager is currently generating about 0.03 per unit of volatility. If you would invest  2,430  in Versus Capital Multi Manager on December 30, 2024 and sell it today you would earn a total of  9.00  from holding Versus Capital Multi Manager or generate 0.37% return on investment over 90 days.

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

Vanguard Total Stock  vs.  Versus Capital Multi Manager

Vanguard Total Stock

Risk-Adjusted Performance

Very Weak

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

Versus Capital Multi

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Versus Capital Multi Manager are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Versus Capital 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 Total and Versus Capital

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

The idea behind Vanguard Total Stock and Versus Capital Multi Manager 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.