Correlation Between Vanguard Value and Avantis Real

Can any of the company-specific risk be diversified away by investing in both Vanguard Value and Avantis Real 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 Value and Avantis Real into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Vanguard Value Index and Avantis Real Estate, you can compare the effects of market volatilities on Vanguard Value and Avantis Real 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 Value with a short position of Avantis Real. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Value and Avantis Real.

Diversification Opportunities for Vanguard Value and Avantis Real

-0.47

Correlation Coefficient

Vanguard Value  Avantis Real

Very good diversification

The 3 months correlation between Vanguard and Avantis is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Value Index and Avantis Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avantis Real Estate and Vanguard Value 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 Value Index are associated (or correlated) with Avantis Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avantis Real Estate has no effect on the direction of Vanguard Value i.e., Vanguard Value and Avantis Real go up and down completely randomly.

Pair Corralation between Vanguard Value and Avantis Real

Considering the 90-day investment horizon Vanguard Value Index is expected to generate 0.71 times more return on investment than Avantis Real. However, Vanguard Value Index is 1.4 times less risky than Avantis Real. It trades about 0.08 of its potential returns per unit of risk. Avantis Real Estate is currently generating about 0.03 per unit of risk. If you would invest  13,453  in Vanguard Value Index on September 14, 2024 and sell it today you would earn a total of  4,017  from holding Vanguard Value Index or generate 29.86% return on investment over 90 days.

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

Vanguard Value Index  vs.  Avantis Real Estate

Vanguard Value Index

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Value Index are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Vanguard Value is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Avantis Real Estate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Avantis Real Estate has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Etf's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

Pair Trading with Vanguard Value and Avantis Real

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

The idea behind Vanguard Value Index and Avantis Real Estate 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.