Correlation Between Sentinel Small and Vanguard Intermediate

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

By analyzing existing cross correlation between Sentinel Small Pany and Vanguard Intermediate Term Bond, you can compare the effects of market volatilities on Sentinel Small and Vanguard Intermediate 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 Sentinel Small with a short position of Vanguard Intermediate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sentinel Small and Vanguard Intermediate.

Diversification Opportunities for Sentinel Small and Vanguard Intermediate

-0.55

Correlation Coefficient

Sentinel Small  Vanguard Intermediate

Excellent diversification

The 3 months correlation between Sentinel and Vanguard is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Sentinel Small Pany and Vanguard Intermediate Term Bon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Intermediate and Sentinel Small 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 Sentinel Small Pany are associated (or correlated) with Vanguard Intermediate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Intermediate has no effect on the direction of Sentinel Small i.e., Sentinel Small and Vanguard Intermediate go up and down completely randomly.

Pair Corralation between Sentinel Small and Vanguard Intermediate

Assuming the 90 days horizon Sentinel Small Pany is expected to generate 3.18 times more return on investment than Vanguard Intermediate. However, Sentinel Small is 3.18 times more volatile than Vanguard Intermediate Term Bond. It trades about 0.16 of its potential returns per unit of risk. Vanguard Intermediate Term Bond is currently generating about -0.11 per unit of risk. If you would invest  699.00  in Sentinel Small Pany on September 12, 2024 and sell it today you would earn a total of  72.00  from holding Sentinel Small Pany or generate 10.3% return on investment over 90 days.

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

Sentinel Small Pany  vs.  Vanguard Intermediate Term Bon

Sentinel Small Pany

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sentinel Small Pany are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Sentinel Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Vanguard Intermediate

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Sentinel Small and Vanguard Intermediate

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

The idea behind Sentinel Small Pany and Vanguard Intermediate Term Bond 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.