Correlation Between Vanguard Extended and Exchange Listed

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

By analyzing existing cross correlation between Vanguard Extended Market and Exchange Listed Funds, you can compare the effects of market volatilities on Vanguard Extended and Exchange Listed 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 Extended with a short position of Exchange Listed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Extended and Exchange Listed.

Diversification Opportunities for Vanguard Extended and Exchange Listed

0.94

Correlation Coefficient

Vanguard Extended  Exchange Listed

Almost no diversification

The 3 months correlation between Vanguard and Exchange is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Extended Market and Exchange Listed Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exchange Listed Funds and Vanguard Extended 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 Extended Market are associated (or correlated) with Exchange Listed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exchange Listed Funds has no effect on the direction of Vanguard Extended i.e., Vanguard Extended and Exchange Listed go up and down completely randomly.

Pair Corralation between Vanguard Extended and Exchange Listed

Considering the 90-day investment horizon Vanguard Extended Market is expected to generate 1.7 times more return on investment than Exchange Listed. However, Vanguard Extended is 1.7 times more volatile than Exchange Listed Funds. It trades about 0.19 of its potential returns per unit of risk. Exchange Listed Funds is currently generating about 0.13 per unit of risk. If you would invest  17,904  in Vanguard Extended Market on August 30, 2024 and sell it today you would earn a total of  2,550  from holding Vanguard Extended Market or generate 14.24% return on investment over 90 days.

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

Vanguard Extended Market  vs.  Exchange Listed Funds

Vanguard Extended Market

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Extended Market are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, Vanguard Extended reported solid returns over the last few months and may actually be approaching a breakup point.

Exchange Listed Funds

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Exchange Listed Funds are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Exchange Listed is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Vanguard Extended and Exchange Listed

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

The idea behind Vanguard Extended Market and Exchange Listed Funds 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.