Correlation Between Stone Ridge and Vanguard Total

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

By analyzing existing cross correlation between Stone Ridge 2053 and Vanguard Total Stock, you can compare the effects of market volatilities on Stone Ridge and Vanguard Total 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 Stone Ridge with a short position of Vanguard Total. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stone Ridge and Vanguard Total.

Diversification Opportunities for Stone Ridge and Vanguard Total

-0.37

Correlation Coefficient

Stone Ridge  Vanguard Total

Very good diversification

The 3 months correlation between Stone and Vanguard is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Stone Ridge 2053 and Vanguard Total Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Total Stock and Stone Ridge 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 Stone Ridge 2053 are associated (or correlated) with Vanguard Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Total Stock has no effect on the direction of Stone Ridge i.e., Stone Ridge and Vanguard Total go up and down completely randomly.

Pair Corralation between Stone Ridge and Vanguard Total

Given the investment horizon of 90 days Stone Ridge 2053 is expected to under-perform the Vanguard Total. But the etf apears to be less risky and, when comparing its historical volatility, Stone Ridge 2053 is 1.2 times less risky than Vanguard Total. The etf trades about -0.15 of its potential returns per unit of risk. The Vanguard Total Stock is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  27,011  in Vanguard Total Stock on September 5, 2024 and sell it today you would earn a total of  3,032  from holding Vanguard Total Stock or generate 11.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	90.48%
Values	Daily Returns

Stone Ridge 2053  vs.  Vanguard Total Stock

Stone Ridge 2053

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stone Ridge 2053 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Stone Ridge is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Vanguard Total Stock

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Total Stock are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, Vanguard Total may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Stone Ridge and Vanguard Total

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

The idea behind Stone Ridge 2053 and Vanguard Total Stock 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.