Correlation Between Vanguard Total and DL Industries

Can any of the company-specific risk be diversified away by investing in both Vanguard Total and DL Industries 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 DL Industries 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 DL Industries ADR, you can compare the effects of market volatilities on Vanguard Total and DL Industries 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 DL Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Total and DL Industries.

Diversification Opportunities for Vanguard Total and DL Industries

0.33

Correlation Coefficient

Vanguard Total  DL Industries

Weak diversification

The 3 months correlation between Vanguard and DLNDY is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Bond and DL Industries ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DL Industries ADR 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 DL Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DL Industries ADR has no effect on the direction of Vanguard Total i.e., Vanguard Total and DL Industries go up and down completely randomly.

Pair Corralation between Vanguard Total and DL Industries

Considering the 90-day investment horizon Vanguard Total Bond is expected to under-perform the DL Industries. But the etf apears to be less risky and, when comparing its historical volatility, Vanguard Total Bond is 6.05 times less risky than DL Industries. The etf trades about -0.25 of its potential returns per unit of risk. The DL Industries ADR is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  262.00  in DL Industries ADR on January 26, 2024 and sell it today you would lose (4.00) from holding DL Industries ADR or give up 1.53% of portfolio value over 90 days.

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

Vanguard Total Bond  vs.  DL Industries ADR

Vanguard Total Bond

Risk-Adjusted Performance

0 of 100

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 newest stock price tumult, may contribute to shorter-term losses for the shareholders.

DL Industries ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DL Industries ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, DL Industries 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 Total and DL Industries

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

The idea behind Vanguard Total Bond and DL Industries ADR 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.