Correlation Between Vanguard Mid-cap and Fam Value

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

By analyzing existing cross correlation between Vanguard Mid Cap Index and Fam Value Fund, you can compare the effects of market volatilities on Vanguard Mid-cap and Fam Value 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 Mid-cap with a short position of Fam Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Mid-cap and Fam Value.

Diversification Opportunities for Vanguard Mid-cap and Fam Value

0.97

Correlation Coefficient

Vanguard Mid-cap  Fam Value

Almost no diversification

The 3 months correlation between VANGUARD and Fam is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Mid Cap Index and Fam Value Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fam Value Fund and Vanguard Mid-cap 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 Mid Cap Index are associated (or correlated) with Fam Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fam Value Fund has no effect on the direction of Vanguard Mid-cap i.e., Vanguard Mid-cap and Fam Value go up and down completely randomly.

Pair Corralation between Vanguard Mid-cap and Fam Value

Assuming the 90 days horizon Vanguard Mid Cap Index is expected to generate 0.82 times more return on investment than Fam Value. However, Vanguard Mid Cap Index is 1.22 times less risky than Fam Value. It trades about 0.28 of its potential returns per unit of risk. Fam Value Fund is currently generating about 0.2 per unit of risk. If you would invest  6,856  in Vanguard Mid Cap Index on September 5, 2024 and sell it today you would earn a total of  872.00  from holding Vanguard Mid Cap Index or generate 12.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

Vanguard Mid Cap Index  vs.  Fam Value Fund

Vanguard Mid Cap

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Mid Cap Index are ranked lower than 21 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Vanguard Mid-cap may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Fam Value Fund

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fam Value Fund are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Fam Value may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Vanguard Mid-cap and Fam Value

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

The idea behind Vanguard Mid Cap Index and Fam Value Fund 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.