Correlation Between ETRACS 2xMonthly and Vanguard Value

Can any of the company-specific risk be diversified away by investing in both ETRACS 2xMonthly and Vanguard Value 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 ETRACS 2xMonthly and Vanguard Value into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ETRACS 2xMonthly Pay and Vanguard Value Factor, you can compare the effects of market volatilities on ETRACS 2xMonthly and Vanguard Value 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 ETRACS 2xMonthly with a short position of Vanguard Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of ETRACS 2xMonthly and Vanguard Value.

Diversification Opportunities for ETRACS 2xMonthly and Vanguard Value

0.8

Correlation Coefficient

ETRACS 2xMonthly  Vanguard Value

Very poor diversification

The 3 months correlation between ETRACS and Vanguard is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding ETRACS 2xMonthly Pay and Vanguard Value Factor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Value Factor and ETRACS 2xMonthly 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 ETRACS 2xMonthly Pay are associated (or correlated) with Vanguard Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Value Factor has no effect on the direction of ETRACS 2xMonthly i.e., ETRACS 2xMonthly and Vanguard Value go up and down completely randomly.

Pair Corralation between ETRACS 2xMonthly and Vanguard Value

Given the investment horizon of 90 days ETRACS 2xMonthly is expected to generate 1.12 times less return on investment than Vanguard Value. In addition to that, ETRACS 2xMonthly is 1.01 times more volatile than Vanguard Value Factor. It trades about 0.11 of its total potential returns per unit of risk. Vanguard Value Factor is currently generating about 0.12 per unit of volatility. If you would invest  10,812  in Vanguard Value Factor on May 7, 2025 and sell it today you would earn a total of  987.00  from holding Vanguard Value Factor or generate 9.13% return on investment over 90 days.

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

ETRACS 2xMonthly Pay  vs.  Vanguard Value Factor

ETRACS 2xMonthly Pay

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in ETRACS 2xMonthly Pay are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite weak technical and fundamental indicators, ETRACS 2xMonthly may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Vanguard Value Factor

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Value Factor are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Vanguard Value may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with ETRACS 2xMonthly and Vanguard Value

The main advantage of trading using opposite ETRACS 2xMonthly and Vanguard Value positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ETRACS 2xMonthly position performs unexpectedly, Vanguard Value 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 Vanguard Value will offset losses from the drop in Vanguard Value's long position.

The idea behind ETRACS 2xMonthly Pay and Vanguard Value Factor 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.