Correlation Between Vanguard Growth and Abacus FCF

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

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

Diversification Opportunities for Vanguard Growth and Abacus FCF

0.61

Correlation Coefficient

Vanguard Growth  Abacus FCF

Poor diversification

The 3 months correlation between Vanguard and Abacus is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Growth Index and Abacus FCF Leaders in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Abacus FCF Leaders and Vanguard Growth 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 Growth Index are associated (or correlated) with Abacus FCF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Abacus FCF Leaders has no effect on the direction of Vanguard Growth i.e., Vanguard Growth and Abacus FCF go up and down completely randomly.

Pair Corralation between Vanguard Growth and Abacus FCF

Considering the 90-day investment horizon Vanguard Growth Index is expected to generate 1.28 times more return on investment than Abacus FCF. However, Vanguard Growth is 1.28 times more volatile than Abacus FCF Leaders. It trades about -0.06 of its potential returns per unit of risk. Abacus FCF Leaders is currently generating about -0.21 per unit of risk. If you would invest  41,986  in Vanguard Growth Index on October 10, 2024 and sell it today you would lose (679.00) from holding Vanguard Growth Index or give up 1.62% of portfolio value over 90 days.

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

Vanguard Growth Index  vs.  Abacus FCF Leaders

Vanguard Growth Index

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Growth Index are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, Vanguard Growth may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Abacus FCF Leaders

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Abacus FCF Leaders are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent technical and fundamental indicators, Abacus FCF is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Vanguard Growth and Abacus FCF

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

The idea behind Vanguard Growth Index and Abacus FCF Leaders 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.