Correlation Between Vanguard Large and Optimize Strategy

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

Diversification Opportunities for Vanguard Large and Optimize Strategy

0.98

Correlation Coefficient

Vanguard Large  Optimize Strategy

Almost no diversification

The 3 months correlation between Vanguard and Optimize is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Large Cap Index and Optimize Strategy Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Optimize Strategy Index 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 Optimize Strategy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Optimize Strategy Index has no effect on the direction of Vanguard Large i.e., Vanguard Large and Optimize Strategy go up and down completely randomly.

Pair Corralation between Vanguard Large and Optimize Strategy

Allowing for the 90-day total investment horizon Vanguard Large is expected to generate 1.83 times less return on investment than Optimize Strategy. But when comparing it to its historical volatility, Vanguard Large Cap Index is 1.31 times less risky than Optimize Strategy. It trades about 0.17 of its potential returns per unit of risk. Optimize Strategy Index is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  2,936  in Optimize Strategy Index on August 30, 2024 and sell it today you would earn a total of  175.00  from holding Optimize Strategy Index or generate 5.96% return on investment over 90 days.

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

Vanguard Large Cap Index  vs.  Optimize Strategy Index

Vanguard Large Cap

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Large Cap Index are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Vanguard Large may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Optimize Strategy Index

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Optimize Strategy Index are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Optimize Strategy may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Vanguard Large and Optimize Strategy

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

The idea behind Vanguard Large Cap Index and Optimize Strategy Index 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.