Correlation Between Vanguard Mega and Virtus Dfa

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

By analyzing existing cross correlation between Vanguard Mega Cap and Virtus Dfa 2040, you can compare the effects of market volatilities on Vanguard Mega and Virtus Dfa 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 Mega with a short position of Virtus Dfa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Mega and Virtus Dfa.

Diversification Opportunities for Vanguard Mega and Virtus Dfa

0.9

Correlation Coefficient

Vanguard Mega  Virtus Dfa

Almost no diversification

The 3 months correlation between Vanguard and Virtus is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Mega Cap and Virtus Dfa 2040 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virtus Dfa 2040 and Vanguard Mega 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 Mega Cap are associated (or correlated) with Virtus Dfa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virtus Dfa 2040 has no effect on the direction of Vanguard Mega i.e., Vanguard Mega and Virtus Dfa go up and down completely randomly.

Pair Corralation between Vanguard Mega and Virtus Dfa

Assuming the 90 days horizon Vanguard Mega Cap is expected to generate 1.62 times more return on investment than Virtus Dfa. However, Vanguard Mega is 1.62 times more volatile than Virtus Dfa 2040. It trades about 0.26 of its potential returns per unit of risk. Virtus Dfa 2040 is currently generating about 0.4 per unit of risk. If you would invest  25,046  in Vanguard Mega Cap on September 5, 2024 and sell it today you would earn a total of  1,118  from holding Vanguard Mega Cap or generate 4.46% return on investment over 90 days.

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

Vanguard Mega Cap  vs.  Virtus Dfa 2040

Vanguard Mega Cap

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Mega Cap are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong essential indicators, Vanguard Mega is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Virtus Dfa 2040

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Virtus Dfa 2040 are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Virtus Dfa 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 Mega and Virtus Dfa

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

The idea behind Vanguard Mega Cap and Virtus Dfa 2040 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.