Correlation Between Vanguard FTSE and Evolve Innovation

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

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

Diversification Opportunities for Vanguard FTSE and Evolve Innovation

0.98

Correlation Coefficient

Vanguard FTSE  Evolve Innovation

Almost no diversification

The 3 months correlation between Vanguard and Evolve is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard FTSE Global and Evolve Innovation Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evolve Innovation Index and Vanguard FTSE 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 FTSE Global are associated (or correlated) with Evolve Innovation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evolve Innovation Index has no effect on the direction of Vanguard FTSE i.e., Vanguard FTSE and Evolve Innovation go up and down completely randomly.

Pair Corralation between Vanguard FTSE and Evolve Innovation

Assuming the 90 days trading horizon Vanguard FTSE is expected to generate 1.16 times less return on investment than Evolve Innovation. But when comparing it to its historical volatility, Vanguard FTSE Global is 1.46 times less risky than Evolve Innovation. It trades about 0.25 of its potential returns per unit of risk. Evolve Innovation Index is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  3,573  in Evolve Innovation Index on September 3, 2024 and sell it today you would earn a total of  403.00  from holding Evolve Innovation Index or generate 11.28% return on investment over 90 days.

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

Vanguard FTSE Global  vs.  Evolve Innovation Index

Vanguard FTSE Global

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard FTSE Global are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Vanguard FTSE may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Evolve Innovation Index

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Evolve Innovation Index are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Evolve Innovation may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Vanguard FTSE and Evolve Innovation

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

The idea behind Vanguard FTSE Global and Evolve Innovation Index 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 Stocks Directory module to find actively traded stocks across global markets.