Correlation Between Vanguard Value and Power Global

Can any of the company-specific risk be diversified away by investing in both Vanguard Value 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 Value 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 Value Index and Power Global Tactical, you can compare the effects of market volatilities on Vanguard Value 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 Value with a short position of Power Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Value and Power Global.

Diversification Opportunities for Vanguard Value and Power Global

0.84

Correlation Coefficient

Vanguard Value  Power Global

Very poor diversification

The 3 months correlation between Vanguard and Power is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Value Index 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 Value 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 Value Index 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 Value i.e., Vanguard Value and Power Global go up and down completely randomly.

Pair Corralation between Vanguard Value and Power Global

Assuming the 90 days horizon Vanguard Value Index is expected to under-perform the Power Global. In addition to that, Vanguard Value is 1.76 times more volatile than Power Global Tactical. It trades about -0.16 of its total potential returns per unit of risk. Power Global Tactical is currently generating about 0.05 per unit of volatility. If you would invest  1,086  in Power Global Tactical on September 20, 2024 and sell it today you would earn a total of  3.00  from holding Power Global Tactical or generate 0.28% return on investment over 90 days.

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

Vanguard Value Index  vs.  Power Global Tactical

Vanguard Value Index

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Vanguard Value Index has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Vanguard Value is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Power Global Tactical

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Power Global Tactical are ranked lower than 5 (%) 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 Value and Power Global

The main advantage of trading using opposite Vanguard Value and Power Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Value 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 Value Index 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.

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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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.