Correlation Between Vanguard Small and Amplify CWP

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

By analyzing existing cross correlation between Vanguard Small Cap Index and Amplify CWP Enhanced, you can compare the effects of market volatilities on Vanguard Small and Amplify CWP 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 Small with a short position of Amplify CWP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small and Amplify CWP.

Diversification Opportunities for Vanguard Small and Amplify CWP

Almost no diversification

The 3 months correlation between Vanguard and Amplify is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small-Cap Index and Amplify CWP Enhanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amplify CWP Enhanced and Vanguard Small 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 Small Cap Index are associated (or correlated) with Amplify CWP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amplify CWP Enhanced has no effect on the direction of Vanguard Small i.e., Vanguard Small and Amplify CWP go up and down completely randomly.

Pair Corralation between Vanguard Small and Amplify CWP

Allowing for the 90-day total investment horizon Vanguard Small Cap Index is expected to under-perform the Amplify CWP. In addition to that, Vanguard Small is 1.77 times more volatile than Amplify CWP Enhanced. It trades about 0.0 of its total potential returns per unit of risk. Amplify CWP Enhanced is currently generating about 0.01 per unit of volatility. If you would invest  3,415  in Amplify CWP Enhanced on September 3, 2023 and sell it today you would earn a total of  143.00  from holding Amplify CWP Enhanced or generate 4.19% return on investment over 90 days.

Vanguard Small-Cap Index  vs.  Amplify CWP Enhanced

Vanguard Small-Cap Index

Vanguard Performance

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Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Small Cap Index are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, Vanguard Small is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Amplify CWP Enhanced

Amplify Performance

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Compared to the overall equity markets, risk-adjusted returns on investments in Amplify CWP Enhanced are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Amplify CWP is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the insiders.

Pair Trading with Vanguard Small and Amplify CWP

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

The idea behind Vanguard Small Cap Index and Amplify CWP Enhanced 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.