Correlation Between Vanguard Value and WisdomTree New

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

Diversification Opportunities for Vanguard Value and WisdomTree New

-0.52

Correlation Coefficient

Vanguard Value  WisdomTree New

Excellent diversification

The 3 months correlation between Vanguard and WisdomTree is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Value Index and WisdomTree New Economy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree New Economy 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 WisdomTree New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree New Economy has no effect on the direction of Vanguard Value i.e., Vanguard Value and WisdomTree New go up and down completely randomly.

Pair Corralation between Vanguard Value and WisdomTree New

Considering the 90-day investment horizon Vanguard Value Index is expected to generate 0.78 times more return on investment than WisdomTree New. However, Vanguard Value Index is 1.28 times less risky than WisdomTree New. It trades about 0.05 of its potential returns per unit of risk. WisdomTree New Economy is currently generating about -0.2 per unit of risk. If you would invest  17,188  in Vanguard Value Index on September 16, 2024 and sell it today you would earn a total of  318.00  from holding Vanguard Value Index or generate 1.85% 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.  WisdomTree New Economy

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.

WisdomTree New Economy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WisdomTree New Economy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent 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 WisdomTree New

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

The idea behind Vanguard Value Index and WisdomTree New Economy 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.