Correlation Between Vanguard Pacific and Invesco European

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

By analyzing existing cross correlation between Vanguard Pacific Stock and Invesco European Growth, you can compare the effects of market volatilities on Vanguard Pacific and Invesco European 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 Pacific with a short position of Invesco European. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Pacific and Invesco European.

Diversification Opportunities for Vanguard Pacific and Invesco European

0.83

Correlation Coefficient

Vanguard Pacific  Invesco European

Very poor diversification

The 3 months correlation between Vanguard and Invesco is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Pacific Stock and Invesco European Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco European Growth and Vanguard Pacific 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 Pacific Stock are associated (or correlated) with Invesco European. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco European Growth has no effect on the direction of Vanguard Pacific i.e., Vanguard Pacific and Invesco European go up and down completely randomly.

Pair Corralation between Vanguard Pacific and Invesco European

Assuming the 90 days horizon Vanguard Pacific Stock is expected to generate 1.24 times more return on investment than Invesco European. However, Vanguard Pacific is 1.24 times more volatile than Invesco European Growth. It trades about -0.03 of its potential returns per unit of risk. Invesco European Growth is currently generating about -0.16 per unit of risk. If you would invest  9,397  in Vanguard Pacific Stock on August 31, 2024 and sell it today you would lose (232.00) from holding Vanguard Pacific Stock or give up 2.47% of portfolio value over 90 days.

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

Vanguard Pacific Stock  vs.  Invesco European Growth

Vanguard Pacific Stock

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Pacific Stock has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Vanguard Pacific is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Invesco European Growth

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco European Growth has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Vanguard Pacific and Invesco European

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

The idea behind Vanguard Pacific Stock and Invesco European Growth 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.