Correlation Between Applied Finance and Vaughan Nelson
Can any of the company-specific risk be diversified away by investing in both Applied Finance and Vaughan Nelson 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 Applied Finance and Vaughan Nelson into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Applied Finance Explorer and Vaughan Nelson Value, you can compare the effects of market volatilities on Applied Finance and Vaughan Nelson 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 Applied Finance with a short position of Vaughan Nelson. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Finance and Vaughan Nelson.
Diversification Opportunities for Applied Finance and Vaughan Nelson
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Applied and Vaughan is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Applied Finance Explorer and Vaughan Nelson Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vaughan Nelson Value and Applied Finance 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 Applied Finance Explorer are associated (or correlated) with Vaughan Nelson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vaughan Nelson Value has no effect on the direction of Applied Finance i.e., Applied Finance and Vaughan Nelson go up and down completely randomly.
Pair Corralation between Applied Finance and Vaughan Nelson
Assuming the 90 days horizon Applied Finance is expected to generate 1.01 times less return on investment than Vaughan Nelson. In addition to that, Applied Finance is 1.59 times more volatile than Vaughan Nelson Value. It trades about 0.05 of its total potential returns per unit of risk. Vaughan Nelson Value is currently generating about 0.08 per unit of volatility. If you would invest 2,002 in Vaughan Nelson Value on September 2, 2024 and sell it today you would earn a total of 916.00 from holding Vaughan Nelson Value or generate 45.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Applied Finance Explorer vs. Vaughan Nelson Value
Performance |
| Timeline |
| Applied Finance Explorer |
| Vaughan Nelson Value |
Applied Finance and Vaughan Nelson Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Applied Finance and Vaughan Nelson
The main advantage of trading using opposite Applied Finance and Vaughan Nelson positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Finance position performs unexpectedly, Vaughan Nelson 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 Vaughan Nelson will offset losses from the drop in Vaughan Nelson's long position.| Applied Finance vs. Thrivent Small Cap | Applied Finance vs. Applied Finance Select | Applied Finance vs. Parnassus Endeavor Fund | Applied Finance vs. Queens Road Small |
| Vaughan Nelson vs. Lord Abbett Small | Vaughan Nelson vs. Applied Finance Explorer | Vaughan Nelson vs. Boston Partners Small | Vaughan Nelson vs. Ultramid Cap Profund Ultramid Cap |
Check out your portfolio center.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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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