Correlation Between Vanguard Growth and US Brent

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Can any of the company-specific risk be diversified away by investing in both Vanguard Growth and US Brent 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 US Brent into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Growth ETF and US Brent Oil, you can compare the effects of market volatilities on Vanguard Growth and US Brent 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 US Brent. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Growth and US Brent.

Diversification Opportunities for Vanguard Growth and US Brent

0.23
  Correlation Coefficient

Modest diversification

The 3 months correlation between Vanguard and US Brent is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Growth ETF and US Brent Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Brent Oil 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 ETF are associated (or correlated) with US Brent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Brent Oil has no effect on the direction of Vanguard Growth i.e., Vanguard Growth and US Brent go up and down completely randomly.

Pair Corralation between Vanguard Growth and US Brent

Considering the 90-day investment horizon Vanguard Growth ETF is expected to generate 0.67 times more return on investment than US Brent. However, Vanguard Growth ETF is 1.48 times less risky than US Brent. It trades about -0.05 of its potential returns per unit of risk. US Brent Oil is currently generating about -0.06 per unit of risk. If you would invest  22,897  in Vanguard Growth ETF on July 4, 2022 and sell it today you would lose (1,502)  from holding Vanguard Growth ETF or give up 6.56% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Vanguard Growth ETF  vs.  US Brent Oil

 Performance (%) 
       Timeline  
Vanguard Growth ETF 
Vanguard Performance
0 of 100
Over the last 90 days Vanguard Growth ETF has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Vanguard Growth is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Vanguard Price Channel

US Brent Oil 
US Brent Performance
0 of 100
Over the last 90 days US Brent Oil has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Etf's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the ETF venture institutional investors.

US Brent Price Channel

Vanguard Growth and US Brent Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Vanguard Growth and US Brent

The main advantage of trading using opposite Vanguard Growth and US Brent positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Growth position performs unexpectedly, US Brent 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 US Brent will offset losses from the drop in US Brent's long position.
The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against Vanguard Growth as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. Vanguard Growth's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, Vanguard Growth's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to Vanguard Growth ETF.
The idea behind Vanguard Growth ETF and US Brent Oil 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.
US Brent vs. Bank Of America
Check out your portfolio center. 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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