Correlation Between Vanguard Sumer and Vanguard Consumer

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

By analyzing existing cross correlation between Vanguard Sumer Discretionary and Vanguard Sumer Staples, you can compare the effects of market volatilities on Vanguard Sumer and Vanguard Consumer 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 Sumer with a short position of Vanguard Consumer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Sumer and Vanguard Consumer.

Diversification Opportunities for Vanguard Sumer and Vanguard Consumer

0.45

Correlation Coefficient

Vanguard Sumer  Vanguard Consumer

Very weak diversification

The 3 months correlation between Vanguard and Vanguard is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Sumer Discretionary and Vanguard Sumer Staples in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Sumer Staples and Vanguard Sumer 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 Sumer Discretionary are associated (or correlated) with Vanguard Consumer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Sumer Staples has no effect on the direction of Vanguard Sumer i.e., Vanguard Sumer and Vanguard Consumer go up and down completely randomly.

Pair Corralation between Vanguard Sumer and Vanguard Consumer

Assuming the 90 days horizon Vanguard Sumer Discretionary is expected to generate 1.67 times more return on investment than Vanguard Consumer. However, Vanguard Sumer is 1.67 times more volatile than Vanguard Sumer Staples. It trades about 0.22 of its potential returns per unit of risk. Vanguard Sumer Staples is currently generating about 0.04 per unit of risk. If you would invest  16,189  in Vanguard Sumer Discretionary on February 10, 2025 and sell it today you would earn a total of  1,142  from holding Vanguard Sumer Discretionary or generate 7.05% return on investment over 90 days.

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

Vanguard Sumer Discretionary  vs.  Vanguard Sumer Staples

Vanguard Sumer Discr

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Sumer Discretionary has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Vanguard Sumer Staples

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Sumer Staples has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Vanguard Consumer 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 Sumer and Vanguard Consumer

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

The idea behind Vanguard Sumer Discretionary and Vanguard Sumer Staples 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.