Correlation Between Vanguard Total and Philotimo Focused

Can any of the company-specific risk be diversified away by investing in both Vanguard Total and Philotimo Focused 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 Philotimo Focused 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 Philotimo Focused Growth, you can compare the effects of market volatilities on Vanguard Total and Philotimo Focused 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 Philotimo Focused. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Total and Philotimo Focused.

Diversification Opportunities for Vanguard Total and Philotimo Focused

0.83

Correlation Coefficient

Vanguard Total  Philotimo Focused

Very poor diversification

The 3 months correlation between Vanguard and Philotimo is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Stock and Philotimo Focused Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Philotimo Focused Growth 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 Philotimo Focused. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Philotimo Focused Growth has no effect on the direction of Vanguard Total i.e., Vanguard Total and Philotimo Focused go up and down completely randomly.

Pair Corralation between Vanguard Total and Philotimo Focused

Assuming the 90 days horizon Vanguard Total is expected to generate 2.74 times less return on investment than Philotimo Focused. But when comparing it to its historical volatility, Vanguard Total Stock is 1.4 times less risky than Philotimo Focused. It trades about 0.08 of its potential returns per unit of risk. Philotimo Focused Growth is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  845.00  in Philotimo Focused Growth on September 30, 2024 and sell it today you would earn a total of  249.00  from holding Philotimo Focused Growth or generate 29.47% return on investment over 90 days.

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

Vanguard Total Stock  vs.  Philotimo Focused Growth

Vanguard Total Stock

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Total Stock are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Vanguard Total is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Philotimo Focused Growth

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Philotimo Focused Growth are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Philotimo Focused showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vanguard Total and Philotimo Focused

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

The idea behind Vanguard Total Stock and Philotimo Focused Growth 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.