Correlation Between Vanguard Mid-cap and Pzena Mid

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

Diversification Opportunities for Vanguard Mid-cap and Pzena Mid

0.84

Correlation Coefficient

Vanguard Mid-cap  Pzena Mid

Very poor diversification

The 3 months correlation between Vanguard and Pzena is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Mid Cap Value and Pzena Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pzena Mid Cap 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 Pzena Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pzena Mid Cap has no effect on the direction of Vanguard Mid-cap i.e., Vanguard Mid-cap and Pzena Mid go up and down completely randomly.

Pair Corralation between Vanguard Mid-cap and Pzena Mid

Assuming the 90 days horizon Vanguard Mid-cap is expected to generate 1.19 times less return on investment than Pzena Mid. But when comparing it to its historical volatility, Vanguard Mid Cap Value is 1.06 times less risky than Pzena Mid. It trades about 0.25 of its potential returns per unit of risk. Pzena Mid Cap is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  1,176  in Pzena Mid Cap on October 20, 2024 and sell it today you would earn a total of  55.00  from holding Pzena Mid Cap or generate 4.68% return on investment over 90 days.

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

Vanguard Mid Cap Value  vs.  Pzena Mid Cap

Vanguard Mid Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Mid Cap Value has generated negative risk-adjusted returns adding no value to fund investors. 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.

Pzena Mid Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pzena Mid Cap 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 primary 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 Pzena Mid

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

The idea behind Vanguard Mid Cap Value and Pzena Mid Cap 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 Stocks Directory module to find actively traded stocks across global markets.