Correlation Between Vanguard Information and NetApp

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

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

Diversification Opportunities for Vanguard Information and NetApp

0.68

Correlation Coefficient

Vanguard Information  NetApp

Poor diversification

The 3 months correlation between Vanguard and NetApp is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Information Technolog and NetApp Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NetApp Inc and Vanguard Information 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 Information Technology are associated (or correlated) with NetApp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NetApp Inc has no effect on the direction of Vanguard Information i.e., Vanguard Information and NetApp go up and down completely randomly.

Pair Corralation between Vanguard Information and NetApp

Considering the 90-day investment horizon Vanguard Information Technology is expected to under-perform the NetApp. But the etf apears to be less risky and, when comparing its historical volatility, Vanguard Information Technology is 1.22 times less risky than NetApp. The etf trades about -0.32 of its potential returns per unit of risk. The NetApp Inc is currently generating about -0.15 of returns per unit of risk over similar time horizon. If you would invest  10,395  in NetApp Inc on January 20, 2024 and sell it today you would lose (381.00) from holding NetApp Inc or give up 3.67% of portfolio value over 90 days.

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

Vanguard Information Technolog  vs.  NetApp Inc

Vanguard Information

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Information Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Vanguard Information is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

NetApp Inc

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NetApp Inc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, NetApp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vanguard Information and NetApp

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

The idea behind Vanguard Information Technology and NetApp Inc 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.