Correlation Between Wilmington Trust and Vanguard Developed

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

By analyzing existing cross correlation between Wilmington Trust Retirement and Vanguard Developed Markets, you can compare the effects of market volatilities on Wilmington Trust and Vanguard Developed 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 Wilmington Trust with a short position of Vanguard Developed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wilmington Trust and Vanguard Developed.

Diversification Opportunities for Wilmington Trust and Vanguard Developed

-0.01

Correlation Coefficient

Wilmington Trust  Vanguard Developed

Good diversification

The 3 months correlation between Wilmington and Vanguard is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Wilmington Trust Retirement and Vanguard Developed Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Developed and Wilmington Trust 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 Wilmington Trust Retirement are associated (or correlated) with Vanguard Developed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Developed has no effect on the direction of Wilmington Trust i.e., Wilmington Trust and Vanguard Developed go up and down completely randomly.

Pair Corralation between Wilmington Trust and Vanguard Developed

Assuming the 90 days trading horizon Wilmington Trust Retirement is expected to under-perform the Vanguard Developed. In addition to that, Wilmington Trust is 1.54 times more volatile than Vanguard Developed Markets. It trades about -0.21 of its total potential returns per unit of risk. Vanguard Developed Markets is currently generating about -0.18 per unit of volatility. If you would invest  2,490  in Vanguard Developed Markets on October 11, 2024 and sell it today you would lose (61.00) from holding Vanguard Developed Markets or give up 2.45% of portfolio value over 90 days.

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

Wilmington Trust Retirement  vs.  Vanguard Developed Markets

Wilmington Trust Ret

Risk-Adjusted Performance

0 of 100

Weak

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

Vanguard Developed

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Wilmington Trust and Vanguard Developed

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

The idea behind Wilmington Trust Retirement and Vanguard Developed Markets 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.