Correlation Between Vanguard Financials and Western AssetClaymore

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

By analyzing existing cross correlation between Vanguard Financials Index and Western AssetClaymore Infl, you can compare the effects of market volatilities on Vanguard Financials and Western AssetClaymore 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 Financials with a short position of Western AssetClaymore. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Financials and Western AssetClaymore.

Diversification Opportunities for Vanguard Financials and Western AssetClaymore

-0.42

Correlation Coefficient

Vanguard Financials  Western AssetClaymore

Very good diversification

The 3 months correlation between Vanguard and Western is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Financials Index and Western AssetClaymore Infl in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western AssetClaymore and Vanguard Financials 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 Financials Index are associated (or correlated) with Western AssetClaymore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western AssetClaymore has no effect on the direction of Vanguard Financials i.e., Vanguard Financials and Western AssetClaymore go up and down completely randomly.

Pair Corralation between Vanguard Financials and Western AssetClaymore

Considering the 90-day investment horizon Vanguard Financials Index is expected to generate 1.88 times more return on investment than Western AssetClaymore. However, Vanguard Financials is 1.88 times more volatile than Western AssetClaymore Infl. It trades about 0.16 of its potential returns per unit of risk. Western AssetClaymore Infl is currently generating about 0.08 per unit of risk. If you would invest  8,338  in Vanguard Financials Index on September 14, 2024 and sell it today you would earn a total of  3,843  from holding Vanguard Financials Index or generate 46.09% return on investment over 90 days.

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

Vanguard Financials Index  vs.  Western AssetClaymore Infl

Vanguard Financials Index

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Financials Index are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain technical and fundamental indicators, Vanguard Financials may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Western AssetClaymore

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Western AssetClaymore Infl has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward indicators, Western AssetClaymore is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vanguard Financials and Western AssetClaymore

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

The idea behind Vanguard Financials Index and Western AssetClaymore Infl 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.