Correlation Between Vanguard and Value8 NV

Can any of the company-specific risk be diversified away by investing in both Vanguard and Value8 NV 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 and Value8 NV into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Vanguard SP 500 and Value8 NV, you can compare the effects of market volatilities on Vanguard and Value8 NV 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 with a short position of Value8 NV. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard and Value8 NV.

Diversification Opportunities for Vanguard and Value8 NV

0.66

Correlation Coefficient

Vanguard  Value8 NV

Poor diversification

The 3 months correlation between Vanguard and Value8 is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard SP 500 and Value8 NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Value8 NV and Vanguard 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 SP 500 are associated (or correlated) with Value8 NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Value8 NV has no effect on the direction of Vanguard i.e., Vanguard and Value8 NV go up and down completely randomly.

Pair Corralation between Vanguard and Value8 NV

Assuming the 90 days trading horizon Vanguard SP 500 is expected to generate 0.53 times more return on investment than Value8 NV. However, Vanguard SP 500 is 1.9 times less risky than Value8 NV. It trades about 0.26 of its potential returns per unit of risk. Value8 NV is currently generating about 0.06 per unit of risk. If you would invest  9,615  in Vanguard SP 500 on September 17, 2024 and sell it today you would earn a total of  1,316  from holding Vanguard SP 500 or generate 13.69% return on investment over 90 days.

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

Vanguard SP 500  vs.  Value8 NV

Vanguard SP 500

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard SP 500 are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Vanguard unveiled solid returns over the last few months and may actually be approaching a breakup point.

Value8 NV

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Value8 NV are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Value8 NV is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vanguard and Value8 NV

The main advantage of trading using opposite Vanguard and Value8 NV positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard position performs unexpectedly, Value8 NV 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 Value8 NV will offset losses from the drop in Value8 NV's long position.

The idea behind Vanguard SP 500 and Value8 NV 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.