Correlation Between Vanguard Consumer and Direxion
Can any of the company-specific risk be diversified away by investing in both Vanguard Consumer and Direxion 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 Consumer and Direxion into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Consumer Staples and Direxion, you can compare the effects of market volatilities on Vanguard Consumer and Direxion 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 Consumer with a short position of Direxion. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Consumer and Direxion.
Diversification Opportunities for Vanguard Consumer and Direxion
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Vanguard and Direxion is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Consumer Staples and Direxion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion and Vanguard Consumer 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 Consumer Staples are associated (or correlated) with Direxion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direxion has no effect on the direction of Vanguard Consumer i.e., Vanguard Consumer and Direxion go up and down completely randomly.
Pair Corralation between Vanguard Consumer and Direxion
Considering the 90-day investment horizon Vanguard Consumer Staples is expected to generate 0.35 times more return on investment than Direxion. However, Vanguard Consumer Staples is 2.86 times less risky than Direxion. It trades about 0.06 of its potential returns per unit of risk. Direxion is currently generating about -0.02 per unit of risk. If you would invest 18,705 in Vanguard Consumer Staples on September 4, 2024 and sell it today you would earn a total of 3,637 from holding Vanguard Consumer Staples or generate 19.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 19.39% |
| Values | Daily Returns |
Vanguard Consumer Staples vs. Direxion
Performance |
| Timeline |
| Vanguard Consumer Staples |
| Direxion |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Vanguard Consumer and Direxion Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Consumer and Direxion
The main advantage of trading using opposite Vanguard Consumer and Direxion positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Consumer position performs unexpectedly, Direxion 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 Direxion will offset losses from the drop in Direxion's long position.| Vanguard Consumer vs. Vanguard Consumer Discretionary | Vanguard Consumer vs. Vanguard Utilities Index | Vanguard Consumer vs. Vanguard Industrials Index | Vanguard Consumer vs. Vanguard Materials Index |
| Direxion vs. Vanguard Consumer Staples | Direxion vs. Vanguard Financials Index | Direxion vs. Vanguard Information Technology | Direxion vs. Vanguard Consumer Discretionary |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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