Correlation Between Vanguard Funds and China Reinsurance

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

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

Diversification Opportunities for Vanguard Funds and China Reinsurance

-0.48

Correlation Coefficient

Vanguard Funds  China Reinsurance

Very good diversification

The 3 months correlation between Vanguard and China is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Funds Public and China Reinsurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Reinsurance and Vanguard Funds 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 Funds Public are associated (or correlated) with China Reinsurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Reinsurance has no effect on the direction of Vanguard Funds i.e., Vanguard Funds and China Reinsurance go up and down completely randomly.

Pair Corralation between Vanguard Funds and China Reinsurance

Assuming the 90 days trading horizon Vanguard Funds Public is expected to under-perform the China Reinsurance. But the etf apears to be less risky and, when comparing its historical volatility, Vanguard Funds Public is 7.36 times less risky than China Reinsurance. The etf trades about -0.1 of its potential returns per unit of risk. The China Reinsurance is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  10.00  in China Reinsurance on December 29, 2024 and sell it today you would earn a total of  2.00  from holding China Reinsurance or generate 20.0% return on investment over 90 days.

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

Vanguard Funds Public  vs.  China Reinsurance

Vanguard Funds Public

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Funds Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady 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.

China Reinsurance

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in China Reinsurance are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, China Reinsurance reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vanguard Funds and China Reinsurance

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

The idea behind Vanguard Funds Public and China Reinsurance 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.

Check out your portfolio center.

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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.