Correlation Between Vanguard Emerging and Kennedy Capital

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

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

Diversification Opportunities for Vanguard Emerging and Kennedy Capital

-0.45

Correlation Coefficient

Vanguard Emerging  Kennedy Capital

Very good diversification

The 3 months correlation between Vanguard and Kennedy is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Emerging Markets and Kennedy Capital Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kennedy Capital Small and Vanguard Emerging 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 Vanguard Emerging Markets are associated (or correlated) with Kennedy Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kennedy Capital Small has no effect on the direction of Vanguard Emerging i.e., Vanguard Emerging and Kennedy Capital go up and down completely randomly.

Pair Corralation between Vanguard Emerging and Kennedy Capital

Assuming the 90 days horizon Vanguard Emerging is expected to generate 1.29 times less return on investment than Kennedy Capital. But when comparing it to its historical volatility, Vanguard Emerging Markets is 1.65 times less risky than Kennedy Capital. It trades about 0.05 of its potential returns per unit of risk. Kennedy Capital Small is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  968.00  in Kennedy Capital Small on September 20, 2024 and sell it today you would earn a total of  243.00  from holding Kennedy Capital Small or generate 25.1% return on investment over 90 days.

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

Vanguard Emerging Markets  vs.  Kennedy Capital Small

Vanguard Emerging Markets

Risk-Adjusted Performance

0 of 100

Weak

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

Kennedy Capital Small

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Vanguard Emerging and Kennedy Capital

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

The idea behind Vanguard Emerging Markets and Kennedy Capital Small 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.