Correlation Between Vanguard Growth and FlexShares ESG

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

Diversification Opportunities for Vanguard Growth and FlexShares ESG

-0.56

Correlation Coefficient

Vanguard Growth  FlexShares ESG

Excellent diversification

The 3 months correlation between Vanguard and FlexShares is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Growth Index and FlexShares ESG Climate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FlexShares ESG Climate 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 FlexShares ESG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FlexShares ESG Climate has no effect on the direction of Vanguard Growth i.e., Vanguard Growth and FlexShares ESG go up and down completely randomly.

Pair Corralation between Vanguard Growth and FlexShares ESG

Considering the 90-day investment horizon Vanguard Growth Index is expected to under-perform the FlexShares ESG. In addition to that, Vanguard Growth is 4.43 times more volatile than FlexShares ESG Climate. It trades about -0.12 of its total potential returns per unit of risk. FlexShares ESG Climate is currently generating about 0.08 per unit of volatility. If you would invest  4,020  in FlexShares ESG Climate on December 30, 2024 and sell it today you would earn a total of  68.00  from holding FlexShares ESG Climate or generate 1.69% return on investment over 90 days.

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

Vanguard Growth Index  vs.  FlexShares ESG Climate

Vanguard Growth Index

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Growth Index has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest abnormal performance, the Etf's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the Exchange Traded Fund stockholders.

FlexShares ESG Climate

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in FlexShares ESG Climate are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable forward indicators, FlexShares ESG is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Vanguard Growth and FlexShares ESG

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

The idea behind Vanguard Growth Index and FlexShares ESG Climate 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.