Correlation Between Vanguard and Energy Select
Can any of the company-specific risk be diversified away by investing in both Vanguard and Energy Select 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 and Energy Select into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard SP Mid Cap and Energy Select Sector, you can compare the effects of market volatilities on Vanguard and Energy Select 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 with a short position of Energy Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard and Energy Select.
Diversification Opportunities for Vanguard and Energy Select
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Vanguard and Energy is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard SP Mid Cap and Energy Select Sector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy Select Sector and Vanguard 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 SP Mid Cap are associated (or correlated) with Energy Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy Select Sector has no effect on the direction of Vanguard i.e., Vanguard and Energy Select go up and down completely randomly.
Pair Corralation between Vanguard and Energy Select
Given the investment horizon of 90 days Vanguard is expected to generate 1.14 times less return on investment than Energy Select. In addition to that, Vanguard is 1.12 times more volatile than Energy Select Sector. It trades about 0.26 of its total potential returns per unit of risk. Energy Select Sector is currently generating about 0.34 per unit of volatility. If you would invest 8,784 in Energy Select Sector on August 30, 2024 and sell it today you would earn a total of 728.00 from holding Energy Select Sector or generate 8.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard SP Mid Cap vs. Energy Select Sector
Performance |
| Timeline |
| Vanguard SP Mid |
| Energy Select Sector |
Vanguard and Energy Select Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard and Energy Select
The main advantage of trading using opposite Vanguard and Energy Select positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard position performs unexpectedly, Energy Select 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 Energy Select will offset losses from the drop in Energy Select's long position.| Vanguard vs. Vanguard SP Small Cap | Vanguard vs. Vanguard SP Mid Cap | Vanguard vs. Vanguard SP Mid Cap | Vanguard vs. Vanguard SP Small Cap |
| Energy Select vs. Financial Select Sector | Energy Select vs. Health Care Select | Energy Select vs. Technology Select Sector | Energy Select vs. Utilities Select Sector |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
Other Complementary Tools
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Fundamental Analysis View fundamental data based on most recent published financial statements | |
| Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon | |
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
| Positions Ratings Determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance |