Correlation Between Overlay Shares and Vanguard
Can any of the company-specific risk be diversified away by investing in both Overlay Shares and Vanguard 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 Overlay Shares and Vanguard into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Overlay Shares Large and Vanguard SP 500, you can compare the effects of market volatilities on Overlay Shares and Vanguard 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 Overlay Shares with a short position of Vanguard. Check out your portfolio center. Please also check ongoing floating volatility patterns of Overlay Shares and Vanguard.
Diversification Opportunities for Overlay Shares and Vanguard
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Overlay and Vanguard is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Overlay Shares Large and Vanguard SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard SP 500 and Overlay Shares 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 Overlay Shares Large are associated (or correlated) with Vanguard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard SP 500 has no effect on the direction of Overlay Shares i.e., Overlay Shares and Vanguard go up and down completely randomly.
Pair Corralation between Overlay Shares and Vanguard
Considering the 90-day investment horizon Overlay Shares Large is expected to generate 0.98 times more return on investment than Vanguard. However, Overlay Shares Large is 1.02 times less risky than Vanguard. It trades about -0.05 of its potential returns per unit of risk. Vanguard SP 500 is currently generating about -0.13 per unit of risk. If you would invest 4,775 in Overlay Shares Large on December 4, 2024 and sell it today you would lose (44.00) from holding Overlay Shares Large or give up 0.92% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Overlay Shares Large vs. Vanguard SP 500
Performance |
| Timeline |
| Overlay Shares Large |
| Vanguard SP 500 |
Overlay Shares and Vanguard Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Overlay Shares and Vanguard
The main advantage of trading using opposite Overlay Shares and Vanguard positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Overlay Shares position performs unexpectedly, Vanguard 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 will offset losses from the drop in Vanguard's long position.| Overlay Shares vs. Overlay Shares Core | Overlay Shares vs. OVS SpA | Overlay Shares vs. Overlay Shares Foreign | Overlay Shares vs. Overlay Shares Municipal |
| Vanguard vs. Vanguard Total Stock | Vanguard vs. Vanguard High Dividend | Vanguard vs. Vanguard Information Technology | Vanguard vs. Invesco QQQ Trust |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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