Correlation Between Vanguard Materials and Vanguard Ftse

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

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

Diversification Opportunities for Vanguard Materials and Vanguard Ftse

0.72

Correlation Coefficient

Vanguard Materials  Vanguard Ftse

Poor diversification

The 3 months correlation between Vanguard and Vanguard is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Materials Index and Vanguard Ftse Social in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Ftse Social and Vanguard Materials 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 Materials Index are associated (or correlated) with Vanguard Ftse. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Ftse Social has no effect on the direction of Vanguard Materials i.e., Vanguard Materials and Vanguard Ftse go up and down completely randomly.

Pair Corralation between Vanguard Materials and Vanguard Ftse

Assuming the 90 days horizon Vanguard Materials is expected to generate 1.72 times less return on investment than Vanguard Ftse. In addition to that, Vanguard Materials is 1.04 times more volatile than Vanguard Ftse Social. It trades about 0.11 of its total potential returns per unit of risk. Vanguard Ftse Social is currently generating about 0.2 per unit of volatility. If you would invest  5,221  in Vanguard Ftse Social on September 3, 2024 and sell it today you would earn a total of  552.00  from holding Vanguard Ftse Social or generate 10.57% return on investment over 90 days.

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

Vanguard Materials Index  vs.  Vanguard Ftse Social

Vanguard Materials Index

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Materials Index are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Vanguard Materials is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Vanguard Ftse Social

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Ftse Social are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Vanguard Ftse may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Vanguard Materials and Vanguard Ftse

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

The idea behind Vanguard Materials Index and Vanguard Ftse Social 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.