Correlation Between Vanguard Value and Praxis Value
Can any of the company-specific risk be diversified away by investing in both Vanguard Value and Praxis Value 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 Praxis Value 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 Praxis Value Index, you can compare the effects of market volatilities on Vanguard Value and Praxis Value 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 Praxis Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Value and Praxis Value.
Diversification Opportunities for Vanguard Value and Praxis Value
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vanguard and Praxis is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Value Index and Praxis Value Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Praxis Value Index 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 Praxis Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Praxis Value Index has no effect on the direction of Vanguard Value i.e., Vanguard Value and Praxis Value go up and down completely randomly.
Pair Corralation between Vanguard Value and Praxis Value
Assuming the 90 days horizon Vanguard Value Index is expected to generate 1.06 times more return on investment than Praxis Value. However, Vanguard Value is 1.06 times more volatile than Praxis Value Index. It trades about 0.16 of its potential returns per unit of risk. Praxis Value Index is currently generating about 0.16 per unit of risk. If you would invest 6,634 in Vanguard Value Index on September 2, 2024 and sell it today you would earn a total of 455.00 from holding Vanguard Value Index or generate 6.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Value Index vs. Praxis Value Index
Performance |
| Timeline |
| Vanguard Value Index |
| Praxis Value Index |
Vanguard Value and Praxis Value Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Value and Praxis Value
The main advantage of trading using opposite Vanguard Value and Praxis Value positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Value position performs unexpectedly, Praxis Value 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 Praxis Value will offset losses from the drop in Praxis Value's long position.| Vanguard Value vs. Vanguard Small Cap Value | Vanguard Value vs. Vanguard Growth Index | Vanguard Value vs. Vanguard Mid Cap Value | Vanguard Value vs. Vanguard Small Cap Index |
| Praxis Value vs. Praxis Growth Index | Praxis Value vs. Praxis Small Cap | Praxis Value vs. Praxis Small Cap | Praxis Value vs. Praxis International 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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