Correlation Between Vanguard Value and Resq Dynamic

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

Diversification Opportunities for Vanguard Value and Resq Dynamic

0.68

Correlation Coefficient

Vanguard Value  Resq Dynamic

Poor diversification

The 3 months correlation between Vanguard and Resq is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Value Index and Resq Dynamic Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Resq Dynamic Allocation 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 Resq Dynamic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Resq Dynamic Allocation has no effect on the direction of Vanguard Value i.e., Vanguard Value and Resq Dynamic go up and down completely randomly.

Pair Corralation between Vanguard Value and Resq Dynamic

Assuming the 90 days horizon Vanguard Value is expected to generate 34.05 times less return on investment than Resq Dynamic. But when comparing it to its historical volatility, Vanguard Value Index is 2.07 times less risky than Resq Dynamic. It trades about 0.01 of its potential returns per unit of risk. Resq Dynamic Allocation is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  924.00  in Resq Dynamic Allocation on September 20, 2024 and sell it today you would earn a total of  135.00  from holding Resq Dynamic Allocation or generate 14.61% return on investment over 90 days.

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

Vanguard Value Index  vs.  Resq Dynamic Allocation

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.

Resq Dynamic Allocation

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Resq Dynamic Allocation are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Resq Dynamic showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vanguard Value and Resq Dynamic

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

The idea behind Vanguard Value Index and Resq Dynamic Allocation 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.