Correlation Between Absolute Convertible and Vanguard Mid-cap
Can any of the company-specific risk be diversified away by investing in both Absolute Convertible and Vanguard Mid-cap 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 Absolute Convertible and Vanguard Mid-cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Absolute Convertible Arbitrage and Vanguard Mid Cap Index, you can compare the effects of market volatilities on Absolute Convertible and Vanguard Mid-cap 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 Absolute Convertible with a short position of Vanguard Mid-cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Absolute Convertible and Vanguard Mid-cap.
Diversification Opportunities for Absolute Convertible and Vanguard Mid-cap
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Absolute and Vanguard is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Absolute Convertible Arbitrage and Vanguard Mid Cap Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Mid Cap and Absolute Convertible 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 Absolute Convertible Arbitrage are associated (or correlated) with Vanguard Mid-cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Mid Cap has no effect on the direction of Absolute Convertible i.e., Absolute Convertible and Vanguard Mid-cap go up and down completely randomly.
Pair Corralation between Absolute Convertible and Vanguard Mid-cap
Assuming the 90 days horizon Absolute Convertible is expected to generate 3.58 times less return on investment than Vanguard Mid-cap. But when comparing it to its historical volatility, Absolute Convertible Arbitrage is 9.57 times less risky than Vanguard Mid-cap. It trades about 0.4 of its potential returns per unit of risk. Vanguard Mid Cap Index is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 36,756 in Vanguard Mid Cap Index on June 8, 2025 and sell it today you would earn a total of 2,289 from holding Vanguard Mid Cap Index or generate 6.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Absolute Convertible Arbitrage vs. Vanguard Mid Cap Index
Performance |
| Timeline |
| Absolute Convertible |
| Vanguard Mid Cap |
Absolute Convertible and Vanguard Mid-cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Absolute Convertible and Vanguard Mid-cap
The main advantage of trading using opposite Absolute Convertible and Vanguard Mid-cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Absolute Convertible position performs unexpectedly, Vanguard Mid-cap 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 Vanguard Mid-cap will offset losses from the drop in Vanguard Mid-cap's long position.| Absolute Convertible vs. First Eagle Gold | Absolute Convertible vs. Global Gold Fund | Absolute Convertible vs. The Gold Bullion | Absolute Convertible vs. International Investors Gold |
| Vanguard Mid-cap vs. Guidepath Conservative Income | Vanguard Mid-cap vs. Putnam Diversified Income | Vanguard Mid-cap vs. Federated Hermes Conservative | Vanguard Mid-cap vs. Elfun Diversified Fund |
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 the Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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