Correlation Between Vanguard Mid and Breakwave Dry

Can any of the company-specific risk be diversified away by investing in both Vanguard Mid and Breakwave Dry 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 and Breakwave Dry 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 Breakwave Dry Bulk, you can compare the effects of market volatilities on Vanguard Mid and Breakwave Dry 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 with a short position of Breakwave Dry. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Mid and Breakwave Dry.

Diversification Opportunities for Vanguard Mid and Breakwave Dry

-0.79

Correlation Coefficient

Vanguard Mid  Breakwave Dry

Pay attention - limited upside

The 3 months correlation between Vanguard and Breakwave is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Mid Cap Index and Breakwave Dry Bulk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Breakwave Dry Bulk and Vanguard Mid 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 Breakwave Dry. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Breakwave Dry Bulk has no effect on the direction of Vanguard Mid i.e., Vanguard Mid and Breakwave Dry go up and down completely randomly.

Pair Corralation between Vanguard Mid and Breakwave Dry

Allowing for the 90-day total investment horizon Vanguard Mid Cap Index is expected to under-perform the Breakwave Dry. But the etf apears to be less risky and, when comparing its historical volatility, Vanguard Mid Cap Index is 4.97 times less risky than Breakwave Dry. The etf trades about -0.03 of its potential returns per unit of risk. The Breakwave Dry Bulk is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  592.00  in Breakwave Dry Bulk on December 29, 2024 and sell it today you would earn a total of  44.00  from holding Breakwave Dry Bulk or generate 7.43% return on investment over 90 days.

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

Vanguard Mid Cap Index  vs.  Breakwave Dry Bulk

Vanguard Mid Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Mid Cap Index has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Vanguard Mid is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Breakwave Dry Bulk

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Breakwave Dry Bulk are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Breakwave Dry showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vanguard Mid and Breakwave Dry

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

The idea behind Vanguard Mid Cap Index and Breakwave Dry Bulk 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.