Correlation Between Vanguard Value and Regional Bank
Can any of the company-specific risk be diversified away by investing in both Vanguard Value and Regional Bank 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 Value and Regional Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Value Index and Regional Bank Fund, you can compare the effects of market volatilities on Vanguard Value and Regional Bank 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 Value with a short position of Regional Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Value and Regional Bank.
Diversification Opportunities for Vanguard Value and Regional Bank
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Vanguard and Regional is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Value Index and Regional Bank Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Regional Bank and Vanguard Value 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 Value Index are associated (or correlated) with Regional Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Regional Bank has no effect on the direction of Vanguard Value i.e., Vanguard Value and Regional Bank go up and down completely randomly.
Pair Corralation between Vanguard Value and Regional Bank
Assuming the 90 days horizon Vanguard Value Index is expected to under-perform the Regional Bank. But the mutual fund apears to be less risky and, when comparing its historical volatility, Vanguard Value Index is 1.56 times less risky than Regional Bank. The mutual fund trades about -0.09 of its potential returns per unit of risk. The Regional Bank Fund is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest 3,335 in Regional Bank Fund on September 13, 2024 and sell it today you would lose (26.00) from holding Regional Bank Fund or give up 0.78% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Value Index vs. Regional Bank Fund
Performance |
| Timeline |
| Vanguard Value Index |
| Regional Bank |
Vanguard Value and Regional Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Value and Regional Bank
The main advantage of trading using opposite Vanguard Value and Regional Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Value position performs unexpectedly, Regional Bank 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 Regional Bank will offset losses from the drop in Regional Bank's long position.| Vanguard Value vs. T Rowe Price | Vanguard Value vs. Baird Strategic Municipal | Vanguard Value vs. Gamco Global Telecommunications | Vanguard Value vs. Nuveen Minnesota Municipal |
| Regional Bank vs. Putnam Convertible Incm Gwth | Regional Bank vs. Lord Abbett Convertible | Regional Bank vs. Allianzgi Convertible Income | Regional Bank vs. Calamos Dynamic Convertible |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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