Correlation Between Vanguard Mid-cap and Copeland Risk

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

By analyzing existing cross correlation between Vanguard Mid Cap Index and Copeland Risk Managed, you can compare the effects of market volatilities on Vanguard Mid-cap and Copeland Risk 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 Mid-cap with a short position of Copeland Risk. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Mid-cap and Copeland Risk.

Diversification Opportunities for Vanguard Mid-cap and Copeland Risk

0.43

Correlation Coefficient

Vanguard Mid-cap  Copeland Risk

Very weak diversification

The 3 months correlation between Vanguard and Copeland is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Mid Cap Index and Copeland Risk Managed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Copeland Risk Managed and Vanguard Mid-cap 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 Mid Cap Index are associated (or correlated) with Copeland Risk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Copeland Risk Managed has no effect on the direction of Vanguard Mid-cap i.e., Vanguard Mid-cap and Copeland Risk go up and down completely randomly.

Pair Corralation between Vanguard Mid-cap and Copeland Risk

Assuming the 90 days horizon Vanguard Mid Cap Index is expected to generate 0.32 times more return on investment than Copeland Risk. However, Vanguard Mid Cap Index is 3.13 times less risky than Copeland Risk. It trades about -0.39 of its potential returns per unit of risk. Copeland Risk Managed is currently generating about -0.31 per unit of risk. If you would invest  7,778  in Vanguard Mid Cap Index on October 5, 2024 and sell it today you would lose (561.00) from holding Vanguard Mid Cap Index or give up 7.21% of portfolio value over 90 days.

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

Vanguard Mid Cap Index  vs.  Copeland Risk Managed

Vanguard Mid Cap

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Mid Cap Index are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Vanguard Mid-cap is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Copeland Risk Managed

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Copeland Risk Managed has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Vanguard Mid-cap and Copeland Risk

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

The idea behind Vanguard Mid Cap Index and Copeland Risk Managed 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.