Correlation Between Vanguard Primecap and Swan Defined

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

By analyzing existing cross correlation between Vanguard Primecap Fund and Swan Defined Risk, you can compare the effects of market volatilities on Vanguard Primecap and Swan Defined 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 Primecap with a short position of Swan Defined. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Primecap and Swan Defined.

Diversification Opportunities for Vanguard Primecap and Swan Defined

0.69

Correlation Coefficient

Vanguard Primecap  Swan Defined

Poor diversification

The 3 months correlation between Vanguard and Swan is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Primecap Fund and Swan Defined Risk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Swan Defined Risk and Vanguard Primecap 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 Primecap Fund are associated (or correlated) with Swan Defined. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Swan Defined Risk has no effect on the direction of Vanguard Primecap i.e., Vanguard Primecap and Swan Defined go up and down completely randomly.

Pair Corralation between Vanguard Primecap and Swan Defined

Assuming the 90 days horizon Vanguard Primecap Fund is expected to under-perform the Swan Defined. In addition to that, Vanguard Primecap is 1.64 times more volatile than Swan Defined Risk. It trades about -0.04 of its total potential returns per unit of risk. Swan Defined Risk is currently generating about 0.01 per unit of volatility. If you would invest  1,333  in Swan Defined Risk on October 23, 2024 and sell it today you would earn a total of  2.00  from holding Swan Defined Risk or generate 0.15% return on investment over 90 days.

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

Vanguard Primecap Fund  vs.  Swan Defined Risk

Vanguard Primecap

Risk-Adjusted Performance

0 of 100

Very Weak

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

Swan Defined Risk

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Vanguard Primecap and Swan Defined

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

The idea behind Vanguard Primecap Fund and Swan Defined Risk 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.