Correlation Between Vanguard Extended and VictoryShares THB

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

By analyzing existing cross correlation between Vanguard Extended Market and VictoryShares THB Mid, you can compare the effects of market volatilities on Vanguard Extended and VictoryShares THB 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 Extended with a short position of VictoryShares THB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Extended and VictoryShares THB.

Diversification Opportunities for Vanguard Extended and VictoryShares THB

0.62

Correlation Coefficient

Vanguard Extended  VictoryShares THB

Poor diversification

The 3 months correlation between Vanguard and VictoryShares is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Extended Market and VictoryShares THB Mid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VictoryShares THB Mid and Vanguard Extended 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 Extended Market are associated (or correlated) with VictoryShares THB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VictoryShares THB Mid has no effect on the direction of Vanguard Extended i.e., Vanguard Extended and VictoryShares THB go up and down completely randomly.

Pair Corralation between Vanguard Extended and VictoryShares THB

Considering the 90-day investment horizon Vanguard Extended Market is expected to generate 1.31 times more return on investment than VictoryShares THB. However, Vanguard Extended is 1.31 times more volatile than VictoryShares THB Mid. It trades about -0.13 of its potential returns per unit of risk. VictoryShares THB Mid is currently generating about -0.24 per unit of risk. If you would invest  20,441  in Vanguard Extended Market on November 28, 2024 and sell it today you would lose (1,688) from holding Vanguard Extended Market or give up 8.26% of portfolio value over 90 days.

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

Vanguard Extended Market  vs.  VictoryShares THB Mid

Vanguard Extended Market

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Extended Market has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest abnormal performance, the Etf's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the Exchange Traded Fund stockholders.

VictoryShares THB Mid

Risk-Adjusted Performance

Very Weak

Over the last 90 days VictoryShares THB Mid has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Etf's fundamental indicators remain relatively invariable which may send shares a bit higher in March 2025. The latest agitation may also be a sign of long-running up-swing for the ETF retail investors.

Pair Trading with Vanguard Extended and VictoryShares THB

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

The idea behind Vanguard Extended Market and VictoryShares THB Mid 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.