Correlation Between Leisure Fund and Vanguard Consumer

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

By analyzing existing cross correlation between Leisure Fund Investor and Vanguard Sumer Discretionary, you can compare the effects of market volatilities on Leisure Fund and Vanguard Consumer 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 Leisure Fund with a short position of Vanguard Consumer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leisure Fund and Vanguard Consumer.

Diversification Opportunities for Leisure Fund and Vanguard Consumer

0.96

Correlation Coefficient

Leisure Fund  Vanguard Consumer

Almost no diversification

The 3 months correlation between Leisure and Vanguard is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Leisure Fund Investor and Vanguard Sumer Discretionary in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Sumer Discr and Leisure Fund 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 Leisure Fund Investor are associated (or correlated) with Vanguard Consumer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Sumer Discr has no effect on the direction of Leisure Fund i.e., Leisure Fund and Vanguard Consumer go up and down completely randomly.

Pair Corralation between Leisure Fund and Vanguard Consumer

Assuming the 90 days horizon Leisure Fund is expected to generate 1.06 times less return on investment than Vanguard Consumer. But when comparing it to its historical volatility, Leisure Fund Investor is 1.55 times less risky than Vanguard Consumer. It trades about 0.38 of its potential returns per unit of risk. Vanguard Sumer Discretionary is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  16,313  in Vanguard Sumer Discretionary on September 3, 2024 and sell it today you would earn a total of  3,143  from holding Vanguard Sumer Discretionary or generate 19.27% return on investment over 90 days.

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

Leisure Fund Investor  vs.  Vanguard Sumer Discretionary

Leisure Fund Investor

Risk-Adjusted Performance

29 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Leisure Fund Investor are ranked lower than 29 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Leisure Fund showed solid returns over the last few months and may actually be approaching a breakup point.

Vanguard Sumer Discr

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Sumer Discretionary are ranked lower than 20 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Vanguard Consumer showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Leisure Fund and Vanguard Consumer

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

The idea behind Leisure Fund Investor and Vanguard Sumer Discretionary 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.