Correlation Between Vanguard and EQT

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

By analyzing existing cross correlation between Vanguard SP 500 and EQT Corporation, you can compare the effects of market volatilities on Vanguard and EQT 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 with a short position of EQT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard and EQT.

Diversification Opportunities for Vanguard and EQT

0.32

Correlation Coefficient

Vanguard  EQT

Weak diversification

The 3 months correlation between Vanguard and EQT is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard SP 500 and EQT Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EQT Corporation and Vanguard 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 SP 500 are associated (or correlated) with EQT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EQT Corporation has no effect on the direction of Vanguard i.e., Vanguard and EQT go up and down completely randomly.

Pair Corralation between Vanguard and EQT

Considering the 90-day investment horizon Vanguard SP 500 is expected to generate 0.3 times more return on investment than EQT. However, Vanguard SP 500 is 3.29 times less risky than EQT. It trades about 0.21 of its potential returns per unit of risk. EQT Corporation is currently generating about 0.02 per unit of risk. If you would invest  47,472  in Vanguard SP 500 on March 5, 2024 and sell it today you would earn a total of  990.00  from holding Vanguard SP 500 or generate 2.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Vanguard SP 500  vs.  EQT Corp.

Vanguard SP 500

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard SP 500 are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Vanguard is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

EQT Corporation

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in EQT Corporation are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, EQT may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Pair Trading with Vanguard and EQT

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

The idea behind Vanguard SP 500 and EQT Corporation 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.