Correlation Between Vanguard Total and 3EDGE Dynamic

Can any of the company-specific risk be diversified away by investing in both Vanguard Total and 3EDGE Dynamic 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 3EDGE Dynamic 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 3EDGE Dynamic Fixed, you can compare the effects of market volatilities on Vanguard Total and 3EDGE Dynamic 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 3EDGE Dynamic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Total and 3EDGE Dynamic.

Diversification Opportunities for Vanguard Total and 3EDGE Dynamic

0.31

Correlation Coefficient

Vanguard Total  3EDGE Dynamic

Weak diversification

The 3 months correlation between Vanguard and 3EDGE is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Stock and 3EDGE Dynamic Fixed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 3EDGE Dynamic Fixed 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 3EDGE Dynamic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 3EDGE Dynamic Fixed has no effect on the direction of Vanguard Total i.e., Vanguard Total and 3EDGE Dynamic go up and down completely randomly.

Pair Corralation between Vanguard Total and 3EDGE Dynamic

Considering the 90-day investment horizon Vanguard Total Stock is expected to generate 8.76 times more return on investment than 3EDGE Dynamic. However, Vanguard Total is 8.76 times more volatile than 3EDGE Dynamic Fixed. It trades about 0.08 of its potential returns per unit of risk. 3EDGE Dynamic Fixed is currently generating about 0.13 per unit of risk. If you would invest  29,729  in Vanguard Total Stock on October 27, 2024 and sell it today you would earn a total of  401.00  from holding Vanguard Total Stock or generate 1.35% return on investment over 90 days.

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

Vanguard Total Stock  vs.  3EDGE Dynamic Fixed

Vanguard Total Stock

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Total Stock are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. 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.

3EDGE Dynamic Fixed

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days 3EDGE Dynamic Fixed has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, 3EDGE Dynamic is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Vanguard Total and 3EDGE Dynamic

The main advantage of trading using opposite Vanguard Total and 3EDGE Dynamic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Total position performs unexpectedly, 3EDGE Dynamic 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 3EDGE Dynamic will offset losses from the drop in 3EDGE Dynamic's long position.

The idea behind Vanguard Total Stock and 3EDGE Dynamic Fixed 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.