Correlation Between Vanguard Financials and 1919 Financial

Can any of the company-specific risk be diversified away by investing in both Vanguard Financials and 1919 Financial 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 Financials and 1919 Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Vanguard Financials Index and 1919 Financial Services, you can compare the effects of market volatilities on Vanguard Financials and 1919 Financial 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 Financials with a short position of 1919 Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Financials and 1919 Financial.

Diversification Opportunities for Vanguard Financials and 1919 Financial

0.9

Correlation Coefficient

Vanguard Financials  1919 Financial

Almost no diversification

The 3 months correlation between Vanguard and 1919 is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Financials Index and 1919 Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 1919 Financial Services and Vanguard Financials 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 Financials Index are associated (or correlated) with 1919 Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 1919 Financial Services has no effect on the direction of Vanguard Financials i.e., Vanguard Financials and 1919 Financial go up and down completely randomly.

Pair Corralation between Vanguard Financials and 1919 Financial

Assuming the 90 days horizon Vanguard Financials Index is expected to generate 0.96 times more return on investment than 1919 Financial. However, Vanguard Financials Index is 1.04 times less risky than 1919 Financial. It trades about -0.15 of its potential returns per unit of risk. 1919 Financial Services is currently generating about -0.17 per unit of risk. If you would invest  5,092  in Vanguard Financials Index on January 30, 2024 and sell it today you would lose (131.00) from holding Vanguard Financials Index or give up 2.57% of portfolio value over 90 days.

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

Vanguard Financials Index  vs.  1919 Financial Services

Vanguard Financials Index

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Financials Index are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Vanguard Financials is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

1919 Financial Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days 1919 Financial Services has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, 1919 Financial 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 Financials and 1919 Financial

The main advantage of trading using opposite Vanguard Financials and 1919 Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Financials position performs unexpectedly, 1919 Financial 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 1919 Financial will offset losses from the drop in 1919 Financial's long position.

The idea behind Vanguard Financials Index and 1919 Financial Services 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.