Correlation Between Swan Defined and Vanguard Financials
Can any of the company-specific risk be diversified away by investing in both Swan Defined and Vanguard Financials 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 Swan Defined and Vanguard Financials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Swan Defined Risk and Vanguard Financials Index, you can compare the effects of market volatilities on Swan Defined and Vanguard Financials 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 Swan Defined with a short position of Vanguard Financials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Swan Defined and Vanguard Financials.
Diversification Opportunities for Swan Defined and Vanguard Financials
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Swan and Vanguard is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Swan Defined Risk and Vanguard Financials Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Financials Index and Swan Defined 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 Swan Defined Risk are associated (or correlated) with Vanguard Financials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Financials Index has no effect on the direction of Swan Defined i.e., Swan Defined and Vanguard Financials go up and down completely randomly.
Pair Corralation between Swan Defined and Vanguard Financials
Assuming the 90 days horizon Swan Defined is expected to generate 3.23 times less return on investment than Vanguard Financials. But when comparing it to its historical volatility, Swan Defined Risk is 1.13 times less risky than Vanguard Financials. It trades about 0.04 of its potential returns per unit of risk. Vanguard Financials Index is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 4,203 in Vanguard Financials Index on September 12, 2024 and sell it today you would earn a total of 1,918 from holding Vanguard Financials Index or generate 45.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Swan Defined Risk vs. Vanguard Financials Index
Performance |
| Timeline |
| Swan Defined Risk |
| Vanguard Financials Index |
Swan Defined and Vanguard Financials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Swan Defined and Vanguard Financials
The main advantage of trading using opposite Swan Defined and Vanguard Financials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Swan Defined position performs unexpectedly, Vanguard Financials 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 Financials will offset losses from the drop in Vanguard Financials' long position.| Swan Defined vs. SCOR PK | Swan Defined vs. Morningstar Unconstrained Allocation | Swan Defined vs. Thrivent High Yield | Swan Defined vs. Via Renewables |
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 Stocks Directory module to find actively traded stocks across global markets.
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