Correlation Between Vanguard STAR and Invesco CurrencyShares
Can any of the company-specific risk be diversified away by investing in both Vanguard STAR and Invesco CurrencyShares 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 STAR and Invesco CurrencyShares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard STAR Funds and Invesco CurrencyShares Euro, you can compare the effects of market volatilities on Vanguard STAR and Invesco CurrencyShares 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 STAR with a short position of Invesco CurrencyShares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard STAR and Invesco CurrencyShares.
Diversification Opportunities for Vanguard STAR and Invesco CurrencyShares
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Vanguard and Invesco is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard STAR Funds and Invesco CurrencyShares Euro in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco CurrencyShares and Vanguard STAR 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 STAR Funds are associated (or correlated) with Invesco CurrencyShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco CurrencyShares has no effect on the direction of Vanguard STAR i.e., Vanguard STAR and Invesco CurrencyShares go up and down completely randomly.
Pair Corralation between Vanguard STAR and Invesco CurrencyShares
Assuming the 90 days trading horizon Vanguard STAR Funds is expected to generate 1.38 times more return on investment than Invesco CurrencyShares. However, Vanguard STAR is 1.38 times more volatile than Invesco CurrencyShares Euro. It trades about 0.05 of its potential returns per unit of risk. Invesco CurrencyShares Euro is currently generating about 0.03 per unit of risk. If you would invest 98,940 in Vanguard STAR Funds on August 28, 2024 and sell it today you would earn a total of 25,100 from holding Vanguard STAR Funds or generate 25.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard STAR Funds vs. Invesco CurrencyShares Euro
Performance |
| Timeline |
| Vanguard STAR Funds |
| Invesco CurrencyShares |
Vanguard STAR and Invesco CurrencyShares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard STAR and Invesco CurrencyShares
The main advantage of trading using opposite Vanguard STAR and Invesco CurrencyShares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard STAR position performs unexpectedly, Invesco CurrencyShares 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 Invesco CurrencyShares will offset losses from the drop in Invesco CurrencyShares' long position.| Vanguard STAR vs. Vanguard Index Funds | Vanguard STAR vs. Vanguard Tax Managed Funds | Vanguard STAR vs. Vanguard International Equity |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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