Correlation Between Janus Overseas and Vanguard Developed

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

By analyzing existing cross correlation between Janus Overseas Fund and Vanguard Developed Markets, you can compare the effects of market volatilities on Janus Overseas and Vanguard Developed 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 Janus Overseas with a short position of Vanguard Developed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Janus Overseas and Vanguard Developed.

Diversification Opportunities for Janus Overseas and Vanguard Developed

0.97

Correlation Coefficient

Janus Overseas  Vanguard Developed

Almost no diversification

The 3 months correlation between Janus and Vanguard is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Janus Overseas Fund and Vanguard Developed Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Developed and Janus Overseas 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 Janus Overseas Fund are associated (or correlated) with Vanguard Developed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Developed has no effect on the direction of Janus Overseas i.e., Janus Overseas and Vanguard Developed go up and down completely randomly.

Pair Corralation between Janus Overseas and Vanguard Developed

Assuming the 90 days horizon Janus Overseas Fund is expected to generate 0.9 times more return on investment than Vanguard Developed. However, Janus Overseas Fund is 1.12 times less risky than Vanguard Developed. It trades about -0.31 of its potential returns per unit of risk. Vanguard Developed Markets is currently generating about -0.34 per unit of risk. If you would invest  4,675  in Janus Overseas Fund on January 20, 2024 and sell it today you would lose (169.00) from holding Janus Overseas Fund or give up 3.61% of portfolio value over 90 days.

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

Janus Overseas Fund  vs.  Vanguard Developed Markets

Janus Overseas

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Janus Overseas Fund are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Janus Overseas may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Vanguard Developed

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Developed Markets are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Vanguard Developed is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Janus Overseas and Vanguard Developed

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

The idea behind Janus Overseas Fund and Vanguard Developed Markets 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.