Correlation Between Vanguard Total and Msvif Mid

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

Diversification Opportunities for Vanguard Total and Msvif Mid

0.88

Correlation Coefficient

Vanguard Total  Msvif Mid

Very poor diversification

The 3 months correlation between Vanguard and Msvif is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Stock and Msvif Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Msvif Mid Cap 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 Msvif Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Msvif Mid Cap has no effect on the direction of Vanguard Total i.e., Vanguard Total and Msvif Mid go up and down completely randomly.

Pair Corralation between Vanguard Total and Msvif Mid

Assuming the 90 days horizon Vanguard Total Stock is expected to generate 0.51 times more return on investment than Msvif Mid. However, Vanguard Total Stock is 1.96 times less risky than Msvif Mid. It trades about -0.08 of its potential returns per unit of risk. Msvif Mid Cap is currently generating about -0.05 per unit of risk. If you would invest  14,309  in Vanguard Total Stock on December 22, 2024 and sell it today you would lose (714.00) from holding Vanguard Total Stock or give up 4.99% of portfolio value over 90 days.

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

Vanguard Total Stock  vs.  Msvif Mid Cap

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 fund investors. In spite of fairly strong primary indicators, Vanguard Total is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Msvif Mid Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Msvif Mid Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Msvif Mid is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vanguard Total and Msvif Mid

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

The idea behind Vanguard Total Stock and Msvif Mid Cap 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.