Correlation Between Vanguard Growth and HCM Defender

Can any of the company-specific risk be diversified away by investing in both Vanguard Growth and HCM Defender 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 HCM Defender 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 HCM Defender 100, you can compare the effects of market volatilities on Vanguard Growth and HCM Defender 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 HCM Defender. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Growth and HCM Defender.

Diversification Opportunities for Vanguard Growth and HCM Defender

0.96

Correlation Coefficient

Vanguard Growth  HCM Defender

Almost no diversification

The 3 months correlation between Vanguard and HCM is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Growth Index and HCM Defender 100 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HCM Defender 100 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 HCM Defender. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HCM Defender 100 has no effect on the direction of Vanguard Growth i.e., Vanguard Growth and HCM Defender go up and down completely randomly.

Pair Corralation between Vanguard Growth and HCM Defender

Considering the 90-day investment horizon Vanguard Growth Index is expected to generate 0.95 times more return on investment than HCM Defender. However, Vanguard Growth Index is 1.05 times less risky than HCM Defender. It trades about -0.1 of its potential returns per unit of risk. HCM Defender 100 is currently generating about -0.14 per unit of risk. If you would invest  41,946  in Vanguard Growth Index on December 27, 2024 and sell it today you would lose (3,643) from holding Vanguard Growth Index or give up 8.68% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.36%
Values	Daily Returns

Vanguard Growth Index  vs.  HCM Defender 100

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.

HCM Defender 100

Risk-Adjusted Performance

Very Weak

Over the last 90 days HCM Defender 100 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Etf's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the Etf traders.

Pair Trading with Vanguard Growth and HCM Defender

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

The idea behind Vanguard Growth Index and HCM Defender 100 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.