Correlation Between Vanguard Total and Abacus FCF

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

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

Diversification Opportunities for Vanguard Total and Abacus FCF

0.95

Correlation Coefficient

Vanguard Total  Abacus FCF

Almost no diversification

The 3 months correlation between Vanguard and Abacus is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Stock and Abacus FCF Leaders in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Abacus FCF Leaders and Vanguard Total 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 Total Stock are associated (or correlated) with Abacus FCF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Abacus FCF Leaders has no effect on the direction of Vanguard Total i.e., Vanguard Total and Abacus FCF go up and down completely randomly.

Pair Corralation between Vanguard Total and Abacus FCF

Considering the 90-day investment horizon Vanguard Total Stock is expected to under-perform the Abacus FCF. But the etf apears to be less risky and, when comparing its historical volatility, Vanguard Total Stock is 1.06 times less risky than Abacus FCF. The etf trades about -0.06 of its potential returns per unit of risk. The Abacus FCF Leaders is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  6,750  in Abacus FCF Leaders on December 20, 2024 and sell it today you would lose (248.00) from holding Abacus FCF Leaders or give up 3.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.33%
Values	Daily Returns

Vanguard Total Stock  vs.  Abacus FCF Leaders

Vanguard Total Stock

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Total Stock has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Vanguard Total is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Abacus FCF Leaders

Risk-Adjusted Performance

Very Weak

Over the last 90 days Abacus FCF Leaders has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, Abacus FCF is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Vanguard Total and Abacus FCF

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

The idea behind Vanguard Total Stock and Abacus FCF Leaders 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.