Correlation Between Vanguard Mid-cap and Hodges Fund

Can any of the company-specific risk be diversified away by investing in both Vanguard Mid-cap and Hodges 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 Mid-cap and Hodges Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Vanguard Mid Cap Index and Hodges Fund Retail, you can compare the effects of market volatilities on Vanguard Mid-cap and Hodges 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 Mid-cap with a short position of Hodges Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Mid-cap and Hodges Fund.

Diversification Opportunities for Vanguard Mid-cap and Hodges Fund

0.84

Correlation Coefficient

Vanguard Mid-cap  Hodges Fund

Very poor diversification

The 3 months correlation between Vanguard and Hodges is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Mid Cap Index and Hodges Fund Retail in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hodges Fund Retail and Vanguard Mid-cap 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 Mid Cap Index are associated (or correlated) with Hodges Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hodges Fund Retail has no effect on the direction of Vanguard Mid-cap i.e., Vanguard Mid-cap and Hodges Fund go up and down completely randomly.

Pair Corralation between Vanguard Mid-cap and Hodges Fund

If you would invest  0.00  in Hodges Fund Retail on February 6, 2024 and sell it today you would earn a total of  0.00  from holding Hodges Fund Retail or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	4.76%
Values	Daily Returns

Vanguard Mid Cap Index  vs.  Hodges Fund Retail

Vanguard Mid Cap

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Mid Cap Index are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Vanguard Mid-cap is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Hodges Fund Retail

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days Hodges Fund Retail has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong primary indicators, Hodges Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vanguard Mid-cap and Hodges Fund

The main advantage of trading using opposite Vanguard Mid-cap and Hodges Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Mid-cap position performs unexpectedly, Hodges 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 Hodges Fund will offset losses from the drop in Hodges Fund's long position.

The idea behind Vanguard Mid Cap Index and Hodges Fund Retail 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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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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.