Correlation Between Vanguard Total and VanEck LongFlat

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

Diversification Opportunities for Vanguard Total and VanEck LongFlat

0.94

Correlation Coefficient

Vanguard Total  VanEck LongFlat

Almost no diversification

The 3 months correlation between Vanguard and VanEck is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Stock and VanEck LongFlat Trend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck LongFlat Trend 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 VanEck LongFlat. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck LongFlat Trend has no effect on the direction of Vanguard Total i.e., Vanguard Total and VanEck LongFlat go up and down completely randomly.

Pair Corralation between Vanguard Total and VanEck LongFlat

Considering the 90-day investment horizon Vanguard Total Stock is expected to generate 0.96 times more return on investment than VanEck LongFlat. However, Vanguard Total Stock is 1.04 times less risky than VanEck LongFlat. It trades about -0.06 of its potential returns per unit of risk. VanEck LongFlat Trend is currently generating about -0.08 per unit of risk. If you would invest  28,980  in Vanguard Total Stock on December 29, 2024 and sell it today you would lose (1,081) from holding Vanguard Total Stock or give up 3.73% 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.  VanEck LongFlat Trend

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.

VanEck LongFlat Trend

Risk-Adjusted Performance

Very Weak

Over the last 90 days VanEck LongFlat Trend has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, VanEck LongFlat is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Vanguard Total and VanEck LongFlat

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

The idea behind Vanguard Total Stock and VanEck LongFlat Trend 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.