Correlation Between Vanguard Mid-cap and Kirr Marbach

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

Diversification Opportunities for Vanguard Mid-cap and Kirr Marbach

0.71

Correlation Coefficient

Vanguard Mid-cap  Kirr Marbach

Poor diversification

The 3 months correlation between Vanguard and Kirr is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Mid Cap Index and Kirr Marbach Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kirr Marbach Partners 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 Kirr Marbach. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kirr Marbach Partners has no effect on the direction of Vanguard Mid-cap i.e., Vanguard Mid-cap and Kirr Marbach go up and down completely randomly.

Pair Corralation between Vanguard Mid-cap and Kirr Marbach

Assuming the 90 days horizon Vanguard Mid Cap Index is expected to generate 0.57 times more return on investment than Kirr Marbach. However, Vanguard Mid Cap Index is 1.76 times less risky than Kirr Marbach. It trades about 0.02 of its potential returns per unit of risk. Kirr Marbach Partners is currently generating about -0.03 per unit of risk. If you would invest  35,840  in Vanguard Mid Cap Index on October 6, 2024 and sell it today you would earn a total of  191.00  from holding Vanguard Mid Cap Index or generate 0.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	97.62%
Values	Daily Returns

Vanguard Mid Cap Index  vs.  Kirr Marbach Partners

Vanguard Mid Cap

Risk-Adjusted Performance

1 of 100

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 basic 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.

Kirr Marbach Partners

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kirr Marbach Partners has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Kirr Marbach 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 Mid-cap and Kirr Marbach

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

The idea behind Vanguard Mid Cap Index and Kirr Marbach Partners 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.