Correlation Between Vanguard Total and Advent Claymore

Can any of the company-specific risk be diversified away by investing in both Vanguard Total and Advent Claymore 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 Advent Claymore 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 Advent Claymore Convertible, you can compare the effects of market volatilities on Vanguard Total and Advent Claymore 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 Advent Claymore. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Total and Advent Claymore.

Diversification Opportunities for Vanguard Total and Advent Claymore

0.57

Correlation Coefficient

Vanguard Total  Advent Claymore

Very weak diversification

The 3 months correlation between Vanguard and Advent is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Stock and Advent Claymore Convertible in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advent Claymore Conv 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 Advent Claymore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advent Claymore Conv has no effect on the direction of Vanguard Total i.e., Vanguard Total and Advent Claymore go up and down completely randomly.

Pair Corralation between Vanguard Total and Advent Claymore

Assuming the 90 days horizon Vanguard Total Stock is expected to generate 1.46 times more return on investment than Advent Claymore. However, Vanguard Total is 1.46 times more volatile than Advent Claymore Convertible. It trades about -0.13 of its potential returns per unit of risk. Advent Claymore Convertible is currently generating about -0.24 per unit of risk. If you would invest  14,581  in Vanguard Total Stock on October 10, 2024 and sell it today you would lose (394.00) from holding Vanguard Total Stock or give up 2.7% of portfolio value over 90 days.

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

Vanguard Total Stock  vs.  Advent Claymore Convertible

Vanguard Total Stock

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Total Stock are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. 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.

Advent Claymore Conv

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Advent Claymore Convertible has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward-looking signals, Advent Claymore 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 Advent Claymore

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

The idea behind Vanguard Total Stock and Advent Claymore Convertible 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.