Correlation Between Vanguard Growth and L4441RAA4

Can any of the company-specific risk be diversified away by investing in both Vanguard Growth and L4441RAA4 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 Growth and L4441RAA4 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Vanguard Growth Index and USL4441RAA43, you can compare the effects of market volatilities on Vanguard Growth and L4441RAA4 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 Growth with a short position of L4441RAA4. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Growth and L4441RAA4.

Diversification Opportunities for Vanguard Growth and L4441RAA4

-0.47

Correlation Coefficient

Vanguard Growth  L4441RAA4

Very good diversification

The 3 months correlation between Vanguard and L4441RAA4 is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Growth Index and USL4441RAA43 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on USL4441RAA43 and Vanguard Growth 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 Growth Index are associated (or correlated) with L4441RAA4. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of USL4441RAA43 has no effect on the direction of Vanguard Growth i.e., Vanguard Growth and L4441RAA4 go up and down completely randomly.

Pair Corralation between Vanguard Growth and L4441RAA4

Considering the 90-day investment horizon Vanguard Growth is expected to generate 11.42 times less return on investment than L4441RAA4. But when comparing it to its historical volatility, Vanguard Growth Index is 28.2 times less risky than L4441RAA4. It trades about 0.18 of its potential returns per unit of risk. USL4441RAA43 is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  4,810  in USL4441RAA43 on January 17, 2024 and sell it today you would earn a total of  1,426  from holding USL4441RAA43 or generate 29.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	84.55%
Values	Daily Returns

Vanguard Growth Index  vs.  USL4441RAA43

Vanguard Growth Index

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Growth Index are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Vanguard Growth may actually be approaching a critical reversion point that can send shares even higher in May 2024.

USL4441RAA43

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in USL4441RAA43 are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, L4441RAA4 sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vanguard Growth and L4441RAA4

The main advantage of trading using opposite Vanguard Growth and L4441RAA4 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Growth position performs unexpectedly, L4441RAA4 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 L4441RAA4 will offset losses from the drop in L4441RAA4's long position.

The idea behind Vanguard Growth Index and USL4441RAA43 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.