Correlation Between Vanguard Value and EA Series

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

Diversification Opportunities for Vanguard Value and EA Series

0.51

Correlation Coefficient

Vanguard Value  EA Series

Very weak diversification

The 3 months correlation between Vanguard and DRAI is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Value Index and EA Series Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EA Series Trust 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 EA Series. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EA Series Trust has no effect on the direction of Vanguard Value i.e., Vanguard Value and EA Series go up and down completely randomly.

Pair Corralation between Vanguard Value and EA Series

Considering the 90-day investment horizon Vanguard Value Index is expected to generate 0.56 times more return on investment than EA Series. However, Vanguard Value Index is 1.79 times less risky than EA Series. It trades about 0.15 of its potential returns per unit of risk. EA Series Trust is currently generating about -0.02 per unit of risk. If you would invest  14,194  in Vanguard Value Index on September 4, 2024 and sell it today you would earn a total of  3,778  from holding Vanguard Value Index or generate 26.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	41.7%
Values	Daily Returns

Vanguard Value Index  vs.  EA Series Trust

Vanguard Value Index

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Value Index are ranked lower than 10 (%) 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.

EA Series Trust

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EA Series Trust are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, EA Series is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Vanguard Value and EA Series

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

The idea behind Vanguard Value Index and EA Series Trust 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.