Correlation Between Vanguard Value and Ivy Value

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

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

Diversification Opportunities for Vanguard Value and Ivy Value

-0.37

Correlation Coefficient

Vanguard Value  Ivy Value

Very good diversification

The 3 months correlation between Vanguard and Ivy is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Value Index and Ivy Value Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ivy Value Fund and Vanguard Value 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 Value Index are associated (or correlated) with Ivy Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ivy Value Fund has no effect on the direction of Vanguard Value i.e., Vanguard Value and Ivy Value go up and down completely randomly.

Pair Corralation between Vanguard Value and Ivy Value

Assuming the 90 days horizon Vanguard Value Index is expected to generate 0.96 times more return on investment than Ivy Value. However, Vanguard Value Index is 1.04 times less risky than Ivy Value. It trades about 0.07 of its potential returns per unit of risk. Ivy Value Fund is currently generating about 0.05 per unit of risk. If you would invest  5,234  in Vanguard Value Index on September 23, 2024 and sell it today you would earn a total of  1,410  from holding Vanguard Value Index or generate 26.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	79.48%
Values	Daily Returns

Vanguard Value Index  vs.  Ivy Value Fund

Vanguard Value Index

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Value Index has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Vanguard Value is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Ivy Value Fund

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ivy Value Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Ivy Value is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vanguard Value and Ivy Value

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

The idea behind Vanguard Value Index and Ivy Value Fund 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.