Correlation Between Vanguard Materials and Materials Portfolio
Can any of the company-specific risk be diversified away by investing in both Vanguard Materials and Materials Portfolio 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 Materials and Materials Portfolio into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Materials Index and Materials Portfolio Fidelity, you can compare the effects of market volatilities on Vanguard Materials and Materials Portfolio 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 Materials with a short position of Materials Portfolio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Materials and Materials Portfolio.
Diversification Opportunities for Vanguard Materials and Materials Portfolio
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Vanguard and Materials is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Materials Index and Materials Portfolio Fidelity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Materials Portfolio and Vanguard Materials 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 Materials Index are associated (or correlated) with Materials Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Materials Portfolio has no effect on the direction of Vanguard Materials i.e., Vanguard Materials and Materials Portfolio go up and down completely randomly.
Pair Corralation between Vanguard Materials and Materials Portfolio
Assuming the 90 days horizon Vanguard Materials is expected to generate 1.23 times less return on investment than Materials Portfolio. But when comparing it to its historical volatility, Vanguard Materials Index is 1.05 times less risky than Materials Portfolio. It trades about 0.05 of its potential returns per unit of risk. Materials Portfolio Fidelity is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 9,530 in Materials Portfolio Fidelity on August 28, 2024 and sell it today you would earn a total of 106.00 from holding Materials Portfolio Fidelity or generate 1.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Materials Index vs. Materials Portfolio Fidelity
Performance |
| Timeline |
| Vanguard Materials Index |
| Materials Portfolio |
Vanguard Materials and Materials Portfolio Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Materials and Materials Portfolio
The main advantage of trading using opposite Vanguard Materials and Materials Portfolio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Materials position performs unexpectedly, Materials Portfolio 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 Materials Portfolio will offset losses from the drop in Materials Portfolio's long position.| Vanguard Materials vs. Vanguard Emerging Markets | Vanguard Materials vs. Vanguard Total International | Vanguard Materials vs. Vanguard Reit Index | Vanguard Materials vs. Vanguard Industrials Index |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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