Correlation Between Vanguard Large and Aptus Large

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

Diversification Opportunities for Vanguard Large and Aptus Large

0.93

Correlation Coefficient

Vanguard Large  Aptus Large

Almost no diversification

The 3 months correlation between Vanguard and Aptus is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Large Cap Index and Aptus Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aptus Large Cap 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 Aptus Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aptus Large Cap has no effect on the direction of Vanguard Large i.e., Vanguard Large and Aptus Large go up and down completely randomly.

Pair Corralation between Vanguard Large and Aptus Large

Allowing for the 90-day total investment horizon Vanguard Large Cap Index is expected to generate 1.03 times more return on investment than Aptus Large. However, Vanguard Large is 1.03 times more volatile than Aptus Large Cap. It trades about -0.08 of its potential returns per unit of risk. Aptus Large Cap is currently generating about -0.08 per unit of risk. If you would invest  26,985  in Vanguard Large Cap Index on December 29, 2024 and sell it today you would lose (1,438) from holding Vanguard Large Cap Index or give up 5.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.39%
Values	Daily Returns

Vanguard Large Cap Index  vs.  Aptus Large Cap

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.

Aptus Large Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aptus Large Cap has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental drivers, Aptus Large is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Vanguard Large and Aptus Large

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

The idea behind Vanguard Large Cap Index and Aptus Large Cap 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 Global Correlations module to find global opportunities by holding instruments from different markets.