Correlation Between Vanguard Wellesley and Vy(r) Franklin

Can any of the company-specific risk be diversified away by investing in both Vanguard Wellesley and Vy(r) Franklin 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 Wellesley and Vy(r) Franklin into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Vanguard Wellesley Income and Vy Franklin Income, you can compare the effects of market volatilities on Vanguard Wellesley and Vy(r) Franklin 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 Wellesley with a short position of Vy(r) Franklin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Wellesley and Vy(r) Franklin.

Diversification Opportunities for Vanguard Wellesley and Vy(r) Franklin

0.32

Correlation Coefficient

Vanguard Wellesley  Vy(r) Franklin

Weak diversification

The 3 months correlation between Vanguard and Vy(r) is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Wellesley Income and Vy Franklin Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vy Franklin Income and Vanguard Wellesley 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 Wellesley Income are associated (or correlated) with Vy(r) Franklin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vy Franklin Income has no effect on the direction of Vanguard Wellesley i.e., Vanguard Wellesley and Vy(r) Franklin go up and down completely randomly.

Pair Corralation between Vanguard Wellesley and Vy(r) Franklin

Assuming the 90 days horizon Vanguard Wellesley is expected to generate 1.8 times less return on investment than Vy(r) Franklin. In addition to that, Vanguard Wellesley is 1.03 times more volatile than Vy Franklin Income. It trades about 0.08 of its total potential returns per unit of risk. Vy Franklin Income is currently generating about 0.14 per unit of volatility. If you would invest  902.00  in Vy Franklin Income on October 9, 2024 and sell it today you would earn a total of  115.00  from holding Vy Franklin Income or generate 12.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.6%
Values	Daily Returns

Vanguard Wellesley Income  vs.  Vy Franklin Income

Vanguard Wellesley Income

Risk-Adjusted Performance

0 of 100

Very Weak

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

Vy Franklin Income

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vy Franklin Income are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Vy(r) Franklin 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 Wellesley and Vy(r) Franklin

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

The idea behind Vanguard Wellesley Income and Vy Franklin Income 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.