Correlation Between Vanguard and Swisscanto

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

Diversification Opportunities for Vanguard and Swisscanto

0.74

Correlation Coefficient

Vanguard  Swisscanto

Poor diversification

The 3 months correlation between Vanguard and Swisscanto is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard SP 500 and Swisscanto CH Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Swisscanto CH Real 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 Swisscanto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Swisscanto CH Real has no effect on the direction of Vanguard i.e., Vanguard and Swisscanto go up and down completely randomly.

Pair Corralation between Vanguard and Swisscanto

Assuming the 90 days trading horizon Vanguard SP 500 is expected to generate 1.46 times more return on investment than Swisscanto. However, Vanguard is 1.46 times more volatile than Swisscanto CH Real. It trades about 0.09 of its potential returns per unit of risk. Swisscanto CH Real is currently generating about 0.05 per unit of risk. If you would invest  9,130  in Vanguard SP 500 on September 28, 2024 and sell it today you would earn a total of  986.00  from holding Vanguard SP 500 or generate 10.8% 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.  Swisscanto CH Real

Vanguard SP 500

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard SP 500 are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Vanguard may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Swisscanto CH Real

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Swisscanto CH Real are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable fundamental indicators, Swisscanto is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Vanguard and Swisscanto

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

The idea behind Vanguard SP 500 and Swisscanto CH Real 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.