Correlation Between Vanguard Total and Harel Index

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Can any of the company-specific risk be diversified away by investing in both Vanguard Total and Harel Index 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 Total and Harel Index into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Total Bond and Harel Index Funds, you can compare the effects of market volatilities on Vanguard Total and Harel Index 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 Total with a short position of Harel Index. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Total and Harel Index.

Diversification Opportunities for Vanguard Total and Harel Index

-0.36
  Correlation Coefficient

Very good diversification

The 3 months correlation between Vanguard and Harel is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Bond and Harel Index Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harel Index Funds and Vanguard Total 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 Total Bond are associated (or correlated) with Harel Index. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harel Index Funds has no effect on the direction of Vanguard Total i.e., Vanguard Total and Harel Index go up and down completely randomly.

Pair Corralation between Vanguard Total and Harel Index

Considering the 90-day investment horizon Vanguard Total is expected to generate 42.3 times less return on investment than Harel Index. But when comparing it to its historical volatility, Vanguard Total Bond is 2.26 times less risky than Harel Index. It trades about 0.01 of its potential returns per unit of risk. Harel Index Funds is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  160,400  in Harel Index Funds on January 19, 2024 and sell it today you would earn a total of  45,500  from holding Harel Index Funds or generate 28.37% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy81.5%
ValuesDaily Returns

Vanguard Total Bond  vs.  Harel Index Funds

 Performance 
       Timeline  
Vanguard Total Bond 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Vanguard Total Bond has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Vanguard Total is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.
Harel Index Funds 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Harel Index Funds are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, Harel Index is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Vanguard Total and Harel Index Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Vanguard Total and Harel Index

The main advantage of trading using opposite Vanguard Total and Harel Index positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Total position performs unexpectedly, Harel Index 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 Harel Index will offset losses from the drop in Harel Index's long position.
The idea behind Vanguard Total Bond and Harel Index Funds 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.

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