Correlation Between Vanguard Mid-cap and Sparta Capital

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

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

Diversification Opportunities for Vanguard Mid-cap and Sparta Capital

-0.49

Correlation Coefficient

Vanguard Mid-cap  Sparta Capital

Very good diversification

The 3 months correlation between Vanguard and Sparta is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Mid Cap Value and Sparta Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sparta Capital 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 Value are associated (or correlated) with Sparta Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sparta Capital has no effect on the direction of Vanguard Mid-cap i.e., Vanguard Mid-cap and Sparta Capital go up and down completely randomly.

Pair Corralation between Vanguard Mid-cap and Sparta Capital

Assuming the 90 days horizon Vanguard Mid Cap Value is expected to generate 0.23 times more return on investment than Sparta Capital. However, Vanguard Mid Cap Value is 4.43 times less risky than Sparta Capital. It trades about 0.18 of its potential returns per unit of risk. Sparta Capital is currently generating about -0.13 per unit of risk. If you would invest  8,473  in Vanguard Mid Cap Value on August 30, 2024 and sell it today you would earn a total of  639.00  from holding Vanguard Mid Cap Value or generate 7.54% return on investment over 90 days.

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

Vanguard Mid Cap Value  vs.  Sparta Capital

Vanguard Mid Cap

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Mid Cap Value are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Vanguard Mid-cap may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Sparta Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sparta Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Vanguard Mid-cap and Sparta Capital

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

The idea behind Vanguard Mid Cap Value and Sparta Capital 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.

Check out your portfolio center.

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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..