Correlation Between Vanguard Large and Themes Natural

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

By analyzing existing cross correlation between Vanguard Large Cap Index and Themes Natural Monopoly, you can compare the effects of market volatilities on Vanguard Large and Themes Natural 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 Large with a short position of Themes Natural. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Large and Themes Natural.

Diversification Opportunities for Vanguard Large and Themes Natural

0.16

Correlation Coefficient

Vanguard Large  Themes Natural

Average diversification

The 3 months correlation between Vanguard and Themes is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Large Cap Index and Themes Natural Monopoly in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Themes Natural Monopoly and Vanguard Large 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 Large Cap Index are associated (or correlated) with Themes Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Themes Natural Monopoly has no effect on the direction of Vanguard Large i.e., Vanguard Large and Themes Natural go up and down completely randomly.

Pair Corralation between Vanguard Large and Themes Natural

Allowing for the 90-day total investment horizon Vanguard Large Cap Index is expected to under-perform the Themes Natural. In addition to that, Vanguard Large is 1.13 times more volatile than Themes Natural Monopoly. It trades about -0.08 of its total potential returns per unit of risk. Themes Natural Monopoly is currently generating about 0.05 per unit of volatility. If you would invest  2,860  in Themes Natural Monopoly on December 28, 2024 and sell it today you would earn a total of  69.15  from holding Themes Natural Monopoly or generate 2.42% return on investment over 90 days.

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

Vanguard Large Cap Index  vs.  Themes Natural Monopoly

Vanguard Large Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Large Cap Index has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Vanguard Large is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Themes Natural Monopoly

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Themes Natural Monopoly are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Themes Natural is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Vanguard Large and Themes Natural

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

The idea behind Vanguard Large Cap Index and Themes Natural Monopoly 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.