Correlation Between Vanguard Funds and LOREAL ADR

Can any of the company-specific risk be diversified away by investing in both Vanguard Funds and LOREAL ADR 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 LOREAL ADR 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 LOREAL ADR 15EO, you can compare the effects of market volatilities on Vanguard Funds and LOREAL ADR 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 LOREAL ADR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Funds and LOREAL ADR.

Diversification Opportunities for Vanguard Funds and LOREAL ADR

-0.84

Correlation Coefficient

Vanguard Funds  LOREAL ADR

Pay attention - limited upside

The 3 months correlation between Vanguard and LOREAL is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Funds Public and LOREAL ADR 15EO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LOREAL ADR 15EO 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 LOREAL ADR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LOREAL ADR 15EO has no effect on the direction of Vanguard Funds i.e., Vanguard Funds and LOREAL ADR go up and down completely randomly.

Pair Corralation between Vanguard Funds and LOREAL ADR

Assuming the 90 days trading horizon Vanguard Funds Public is expected to generate 0.45 times more return on investment than LOREAL ADR. However, Vanguard Funds Public is 2.21 times less risky than LOREAL ADR. It trades about 0.25 of its potential returns per unit of risk. LOREAL ADR 15EO is currently generating about -0.07 per unit of risk. If you would invest  9,582  in Vanguard Funds Public on September 15, 2024 and sell it today you would earn a total of  1,382  from holding Vanguard Funds Public or generate 14.42% return on investment over 90 days.

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

Vanguard Funds Public  vs.  LOREAL ADR 15EO

Vanguard Funds Public

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Funds Public are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Vanguard Funds reported solid returns over the last few months and may actually be approaching a breakup point.

LOREAL ADR 15EO

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LOREAL ADR 15EO has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Vanguard Funds and LOREAL ADR

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

The idea behind Vanguard Funds Public and LOREAL ADR 15EO 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.