Correlation Between Vanguard Financials and Metalpha Technology

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

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

Diversification Opportunities for Vanguard Financials and Metalpha Technology

0.31

Correlation Coefficient

Vanguard Financials  Metalpha Technology

Weak diversification

The 3 months correlation between Vanguard and Metalpha is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Financials Index and Metalpha Technology Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metalpha Technology and Vanguard Financials 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 Financials Index are associated (or correlated) with Metalpha Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metalpha Technology has no effect on the direction of Vanguard Financials i.e., Vanguard Financials and Metalpha Technology go up and down completely randomly.

Pair Corralation between Vanguard Financials and Metalpha Technology

Considering the 90-day investment horizon Vanguard Financials Index is expected to under-perform the Metalpha Technology. But the etf apears to be less risky and, when comparing its historical volatility, Vanguard Financials Index is 3.69 times less risky than Metalpha Technology. The etf trades about -0.03 of its potential returns per unit of risk. The Metalpha Technology Holding is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  143.00  in Metalpha Technology Holding on January 25, 2024 and sell it today you would earn a total of  12.00  from holding Metalpha Technology Holding or generate 8.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Vanguard Financials Index  vs.  Metalpha Technology Holding

Vanguard Financials Index

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Financials Index are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical and fundamental indicators, Vanguard Financials may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Metalpha Technology

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Metalpha Technology Holding are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Metalpha Technology may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Vanguard Financials and Metalpha Technology

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

The idea behind Vanguard Financials Index and Metalpha Technology Holding 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.