Correlation Between Vanguard FTSE and QuantShares Enhanced

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

By analyzing existing cross correlation between Vanguard FTSE Emerging and QuantShares Enhanced Core, you can compare the effects of market volatilities on Vanguard FTSE and QuantShares Enhanced 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 QuantShares Enhanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard FTSE and QuantShares Enhanced.

Diversification Opportunities for Vanguard FTSE and QuantShares Enhanced

0.87

Correlation Coefficient

Vanguard FTSE  QuantShares Enhanced

Very poor diversification

The 3 months correlation between Vanguard and QuantShares is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard FTSE Emerging and QuantShares Enhanced Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on QuantShares Enhanced Core 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 Emerging are associated (or correlated) with QuantShares Enhanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of QuantShares Enhanced Core has no effect on the direction of Vanguard FTSE i.e., Vanguard FTSE and QuantShares Enhanced go up and down completely randomly.

Pair Corralation between Vanguard FTSE and QuantShares Enhanced

Assuming the 90 days trading horizon Vanguard FTSE Emerging is expected to generate 0.85 times more return on investment than QuantShares Enhanced. However, Vanguard FTSE Emerging is 1.18 times less risky than QuantShares Enhanced. It trades about 0.05 of its potential returns per unit of risk. QuantShares Enhanced Core is currently generating about 0.03 per unit of risk. If you would invest  3,010  in Vanguard FTSE Emerging on February 4, 2024 and sell it today you would earn a total of  580.00  from holding Vanguard FTSE Emerging or generate 19.27% return on investment over 90 days.

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

Vanguard FTSE Emerging  vs.  QuantShares Enhanced Core

Vanguard FTSE Emerging

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard FTSE Emerging are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Vanguard FTSE may actually be approaching a critical reversion point that can send shares even higher in June 2024.

QuantShares Enhanced Core

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in QuantShares Enhanced Core are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating primary indicators, QuantShares Enhanced may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Vanguard FTSE and QuantShares Enhanced

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

The idea behind Vanguard FTSE Emerging and QuantShares Enhanced Core 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.