Correlation Between Vanguard Information and Arbitrage Fund
Can any of the company-specific risk be diversified away by investing in both Vanguard Information and Arbitrage Fund 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 Information and Arbitrage Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Information Technology and The Arbitrage Fund, you can compare the effects of market volatilities on Vanguard Information and Arbitrage Fund 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 Information with a short position of Arbitrage Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Information and Arbitrage Fund.
Diversification Opportunities for Vanguard Information and Arbitrage Fund
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Vanguard and Arbitrage is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Information Technolog and The Arbitrage Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arbitrage Fund and Vanguard Information 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 Information Technology are associated (or correlated) with Arbitrage Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arbitrage Fund has no effect on the direction of Vanguard Information i.e., Vanguard Information and Arbitrage Fund go up and down completely randomly.
Pair Corralation between Vanguard Information and Arbitrage Fund
Assuming the 90 days horizon Vanguard Information Technology is expected to generate 4.73 times more return on investment than Arbitrage Fund. However, Vanguard Information is 4.73 times more volatile than The Arbitrage Fund. It trades about 0.33 of its potential returns per unit of risk. The Arbitrage Fund is currently generating about 0.09 per unit of risk. If you would invest 30,957 in Vanguard Information Technology on September 19, 2024 and sell it today you would earn a total of 2,005 from holding Vanguard Information Technology or generate 6.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Information Technolog vs. The Arbitrage Fund
Performance |
| Timeline |
| Vanguard Information |
| Arbitrage Fund |
Vanguard Information and Arbitrage Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Information and Arbitrage Fund
The main advantage of trading using opposite Vanguard Information and Arbitrage Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Information position performs unexpectedly, Arbitrage Fund 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 Arbitrage Fund will offset losses from the drop in Arbitrage Fund's long position.The idea behind Vanguard Information Technology and The Arbitrage Fund pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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