Correlation Between Vanguard Total and Power Global

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

By analyzing existing cross correlation between Vanguard Total Stock and Power Global Tactical, you can compare the effects of market volatilities on Vanguard Total and Power Global 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 Total with a short position of Power Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Total and Power Global.

Diversification Opportunities for Vanguard Total and Power Global

0.93

Correlation Coefficient

Vanguard Total  Power Global

Almost no diversification

The 3 months correlation between Vanguard and Power is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Stock and Power Global Tactical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Global Tactical and Vanguard Total 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 Total Stock are associated (or correlated) with Power Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Global Tactical has no effect on the direction of Vanguard Total i.e., Vanguard Total and Power Global go up and down completely randomly.

Pair Corralation between Vanguard Total and Power Global

Assuming the 90 days horizon Vanguard Total Stock is expected to generate 2.22 times more return on investment than Power Global. However, Vanguard Total is 2.22 times more volatile than Power Global Tactical. It trades about 0.15 of its potential returns per unit of risk. Power Global Tactical is currently generating about 0.06 per unit of risk. If you would invest  13,691  in Vanguard Total Stock on September 19, 2024 and sell it today you would earn a total of  899.00  from holding Vanguard Total Stock or generate 6.57% return on investment over 90 days.

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

Vanguard Total Stock  vs.  Power Global Tactical

Vanguard Total Stock

Risk-Adjusted Performance

12 of 100

Good

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

Power Global Tactical

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Power Global Tactical are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Power Global 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 Total and Power Global

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

The idea behind Vanguard Total Stock and Power Global Tactical 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.

Check out your portfolio center.

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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.