Correlation Between Royce Dividend and Vanguard Mid-cap

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

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

Diversification Opportunities for Royce Dividend and Vanguard Mid-cap

-0.27

Correlation Coefficient

Royce Dividend  Vanguard Mid-cap

Very good diversification

The 3 months correlation between Royce and Vanguard is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Royce Dividend Value and Vanguard Mid Cap Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Mid Cap and Royce Dividend 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 Royce Dividend Value are associated (or correlated) with Vanguard Mid-cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Mid Cap has no effect on the direction of Royce Dividend i.e., Royce Dividend and Vanguard Mid-cap go up and down completely randomly.

Pair Corralation between Royce Dividend and Vanguard Mid-cap

If you would invest  5,296  in Vanguard Mid Cap Index on January 25, 2024 and sell it today you would earn a total of  1,236  from holding Vanguard Mid Cap Index or generate 23.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	0.81%
Values	Daily Returns

Royce Dividend Value  vs.  Vanguard Mid Cap Index

Royce Dividend Value

Risk-Adjusted Performance

0 of 100

Very Weak

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

Vanguard Mid Cap

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Mid Cap Index are ranked lower than 6 (%) 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.

Pair Trading with Royce Dividend and Vanguard Mid-cap

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

The idea behind Royce Dividend Value and Vanguard Mid Cap Index 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.