Correlation Between Vanguard Mid and Invesco ESG

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

By analyzing existing cross correlation between Vanguard Mid Cap Growth and Invesco ESG NASDAQ, you can compare the effects of market volatilities on Vanguard Mid and Invesco ESG 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 Invesco ESG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Mid and Invesco ESG.

Diversification Opportunities for Vanguard Mid and Invesco ESG

0.91

Correlation Coefficient

Vanguard Mid  Invesco ESG

Almost no diversification

The 3 months correlation between Vanguard and Invesco is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Mid Cap Growth and Invesco ESG NASDAQ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco ESG NASDAQ 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 Growth are associated (or correlated) with Invesco ESG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco ESG NASDAQ has no effect on the direction of Vanguard Mid i.e., Vanguard Mid and Invesco ESG go up and down completely randomly.

Pair Corralation between Vanguard Mid and Invesco ESG

Considering the 90-day investment horizon Vanguard Mid Cap Growth is expected to generate 1.09 times more return on investment than Invesco ESG. However, Vanguard Mid is 1.09 times more volatile than Invesco ESG NASDAQ. It trades about -0.05 of its potential returns per unit of risk. Invesco ESG NASDAQ is currently generating about -0.07 per unit of risk. If you would invest  27,023  in Vanguard Mid Cap Growth on December 2, 2024 and sell it today you would lose (1,020) from holding Vanguard Mid Cap Growth or give up 3.77% of portfolio value over 90 days.

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

Vanguard Mid Cap Growth  vs.  Invesco ESG NASDAQ

Vanguard Mid Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Mid Cap Growth has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Vanguard Mid is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Invesco ESG NASDAQ

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco ESG NASDAQ has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward-looking indicators, Invesco ESG is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Vanguard Mid and Invesco ESG

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

The idea behind Vanguard Mid Cap Growth and Invesco ESG NASDAQ 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.