Correlation Between Vanguard Total and IMGP DBi

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

Diversification Opportunities for Vanguard Total and IMGP DBi

0.77

Correlation Coefficient

Vanguard Total  IMGP DBi

Poor diversification

The 3 months correlation between Vanguard and IMGP is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Stock and iMGP DBi Managed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iMGP DBi Managed 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 IMGP DBi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iMGP DBi Managed has no effect on the direction of Vanguard Total i.e., Vanguard Total and IMGP DBi go up and down completely randomly.

Pair Corralation between Vanguard Total and IMGP DBi

Considering the 90-day investment horizon Vanguard Total Stock is expected to under-perform the IMGP DBi. In addition to that, Vanguard Total is 1.71 times more volatile than iMGP DBi Managed. It trades about -0.06 of its total potential returns per unit of risk. iMGP DBi Managed is currently generating about -0.06 per unit of volatility. If you would invest  2,601  in iMGP DBi Managed on December 28, 2024 and sell it today you would lose (58.00) from holding iMGP DBi Managed or give up 2.23% of portfolio value over 90 days.

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

Vanguard Total Stock  vs.  iMGP DBi Managed

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.

iMGP DBi Managed

Risk-Adjusted Performance

Very Weak

Over the last 90 days iMGP DBi Managed has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, IMGP DBi is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Vanguard Total and IMGP DBi

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

The idea behind Vanguard Total Stock and iMGP DBi Managed 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.

Check out your portfolio center.

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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.