Correlation Between Vanguard Small and Catalystmillburn

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

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

Diversification Opportunities for Vanguard Small and Catalystmillburn

0.9

Correlation Coefficient

Vanguard Small  Catalystmillburn

Almost no diversification

The 3 months correlation between Vanguard and Catalystmillburn is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Value and Catalystmillburn Hedge Strateg in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalystmillburn Hedge and Vanguard 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 Vanguard Small Cap Value are associated (or correlated) with Catalystmillburn. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Catalystmillburn Hedge has no effect on the direction of Vanguard Small i.e., Vanguard Small and Catalystmillburn go up and down completely randomly.

Pair Corralation between Vanguard Small and Catalystmillburn

Assuming the 90 days horizon Vanguard Small Cap Value is expected to under-perform the Catalystmillburn. In addition to that, Vanguard Small is 2.54 times more volatile than Catalystmillburn Hedge Strategy. It trades about -0.09 of its total potential returns per unit of risk. Catalystmillburn Hedge Strategy is currently generating about 0.19 per unit of volatility. If you would invest  3,966  in Catalystmillburn Hedge Strategy on September 12, 2024 and sell it today you would earn a total of  48.00  from holding Catalystmillburn Hedge Strategy or generate 1.21% return on investment over 90 days.

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

Vanguard Small Cap Value  vs.  Catalystmillburn Hedge Strateg

Vanguard Small Cap

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Small Cap Value are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Vanguard Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Catalystmillburn Hedge

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Catalystmillburn Hedge Strategy are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Catalystmillburn may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Vanguard Small and Catalystmillburn

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

The idea behind Vanguard Small Cap Value and Catalystmillburn Hedge Strategy 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.