Correlation Between Vanguard Total and VictoryShares 500

Can any of the company-specific risk be diversified away by investing in both Vanguard Total and VictoryShares 500 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 VictoryShares 500 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 VictoryShares 500 Volatility, you can compare the effects of market volatilities on Vanguard Total and VictoryShares 500 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 VictoryShares 500. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Total and VictoryShares 500.

Diversification Opportunities for Vanguard Total and VictoryShares 500

0.91

Correlation Coefficient

Vanguard Total  VictoryShares 500

Almost no diversification

The 3 months correlation between Vanguard and VictoryShares is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Stock and VictoryShares 500 Volatility in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VictoryShares 500 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 VictoryShares 500. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VictoryShares 500 has no effect on the direction of Vanguard Total i.e., Vanguard Total and VictoryShares 500 go up and down completely randomly.

Pair Corralation between Vanguard Total and VictoryShares 500

Considering the 90-day investment horizon Vanguard Total Stock is expected to under-perform the VictoryShares 500. In addition to that, Vanguard Total is 1.25 times more volatile than VictoryShares 500 Volatility. It trades about -0.09 of its total potential returns per unit of risk. VictoryShares 500 Volatility is currently generating about -0.02 per unit of volatility. If you would invest  8,487  in VictoryShares 500 Volatility on December 30, 2024 and sell it today you would lose (107.00) from holding VictoryShares 500 Volatility or give up 1.26% of portfolio value over 90 days.

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

Vanguard Total Stock  vs.  VictoryShares 500 Volatility

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.

VictoryShares 500

Risk-Adjusted Performance

Very Weak

Over the last 90 days VictoryShares 500 Volatility has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, VictoryShares 500 is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vanguard Total and VictoryShares 500

The main advantage of trading using opposite Vanguard Total and VictoryShares 500 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Total position performs unexpectedly, VictoryShares 500 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 VictoryShares 500 will offset losses from the drop in VictoryShares 500's long position.

The idea behind Vanguard Total Stock and VictoryShares 500 Volatility 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.