Correlation Between Vanguard Mid and Amplify CWP

Can any of the company-specific risk be diversified away by investing in both Vanguard Mid 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 Mid 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 Mid Cap Index and Amplify CWP Enhanced, you can compare the effects of market volatilities on Vanguard Mid 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 Mid with a short position of Amplify CWP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Mid and Amplify CWP.

Diversification Opportunities for Vanguard Mid and Amplify CWP

Almost no diversification

The 3 months correlation between Vanguard and Amplify is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Mid-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 Mid 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 Mid 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 Mid i.e., Vanguard Mid and Amplify CWP go up and down completely randomly.

Pair Corralation between Vanguard Mid and Amplify CWP

Allowing for the 90-day total investment horizon Vanguard Mid Cap Index is expected to generate 1.79 times more return on investment than Amplify CWP. However, Vanguard Mid is 1.79 times more volatile than Amplify CWP Enhanced. It trades about 0.03 of its potential returns per unit of risk. Amplify CWP Enhanced is currently generating about 0.0 per unit of risk. If you would invest  21,659  in Vanguard Mid Cap Index on September 9, 2023 and sell it today you would earn a total of  380.00  from holding Vanguard Mid Cap Index or generate 1.75% return on investment over 90 days.

Vanguard Mid-Cap Index  vs.  Amplify CWP Enhanced

Vanguard Mid-Cap Index

Vanguard Performance

2 of 100

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Mid Cap Index are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Vanguard Mid is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the insiders.

Amplify CWP Enhanced

Amplify Performance

0 of 100

Over the last 90 days Amplify CWP Enhanced has generated negative risk-adjusted returns adding no value to investors with long positions. 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 Mid and Amplify CWP

The main advantage of trading using opposite Vanguard Mid and Amplify CWP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Mid 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 Mid 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.