Correlation Between ZKB Palladium and Vanguard

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

By analyzing existing cross correlation between ZKB Palladium ETF and Vanguard SP 500, you can compare the effects of market volatilities on ZKB Palladium and Vanguard 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 ZKB Palladium with a short position of Vanguard. Check out your portfolio center. Please also check ongoing floating volatility patterns of ZKB Palladium and Vanguard.

Diversification Opportunities for ZKB Palladium and Vanguard

-0.33

Correlation Coefficient

ZKB Palladium  Vanguard

Very good diversification

The 3 months correlation between ZKB and Vanguard is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding ZKB Palladium ETF and Vanguard SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard SP 500 and ZKB Palladium 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 ZKB Palladium ETF are associated (or correlated) with Vanguard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard SP 500 has no effect on the direction of ZKB Palladium i.e., ZKB Palladium and Vanguard go up and down completely randomly.

Pair Corralation between ZKB Palladium and Vanguard

Assuming the 90 days trading horizon ZKB Palladium ETF is expected to under-perform the Vanguard. In addition to that, ZKB Palladium is 3.05 times more volatile than Vanguard SP 500. It trades about -0.13 of its total potential returns per unit of risk. Vanguard SP 500 is currently generating about 0.07 per unit of volatility. If you would invest  10,108  in Vanguard SP 500 on September 30, 2024 and sell it today you would earn a total of  80.00  from holding Vanguard SP 500 or generate 0.79% return on investment over 90 days.

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

ZKB Palladium ETF  vs.  Vanguard SP 500

ZKB Palladium ETF

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ZKB Palladium ETF has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, ZKB Palladium is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Vanguard SP 500

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard SP 500 are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Vanguard may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with ZKB Palladium and Vanguard

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

The idea behind ZKB Palladium ETF and Vanguard SP 500 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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.