Correlation Between Vanguard Value and ETRACS Quarterly

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

Diversification Opportunities for Vanguard Value and ETRACS Quarterly

0.79

Correlation Coefficient

Vanguard Value  ETRACS Quarterly

Poor diversification

The 3 months correlation between Vanguard and ETRACS is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Value Index and ETRACS Quarterly Pay in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETRACS Quarterly Pay 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 ETRACS Quarterly. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETRACS Quarterly Pay has no effect on the direction of Vanguard Value i.e., Vanguard Value and ETRACS Quarterly go up and down completely randomly.

Pair Corralation between Vanguard Value and ETRACS Quarterly

Considering the 90-day investment horizon Vanguard Value Index is expected to under-perform the ETRACS Quarterly. But the etf apears to be less risky and, when comparing its historical volatility, Vanguard Value Index is 1.56 times less risky than ETRACS Quarterly. The etf trades about -0.12 of its potential returns per unit of risk. The ETRACS Quarterly Pay is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  3,057  in ETRACS Quarterly Pay on September 13, 2024 and sell it today you would earn a total of  155.00  from holding ETRACS Quarterly Pay or generate 5.07% return on investment over 90 days.

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

Vanguard Value Index  vs.  ETRACS Quarterly Pay

Vanguard Value Index

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Value Index are ranked lower than 5 (%) 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.

ETRACS Quarterly Pay

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ETRACS Quarterly Pay are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental indicators, ETRACS Quarterly is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vanguard Value and ETRACS Quarterly

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

The idea behind Vanguard Value Index and ETRACS Quarterly Pay 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.