Correlation Between BetaShares Australian and Vanguard FTSE
Can any of the company-specific risk be diversified away by investing in both BetaShares Australian and Vanguard FTSE 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 BetaShares Australian and Vanguard FTSE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BetaShares Australian Government and Vanguard FTSE Europe, you can compare the effects of market volatilities on BetaShares Australian and Vanguard FTSE 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 BetaShares Australian with a short position of Vanguard FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of BetaShares Australian and Vanguard FTSE.
Diversification Opportunities for BetaShares Australian and Vanguard FTSE
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BetaShares and Vanguard is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding BetaShares Australian Governme and Vanguard FTSE Europe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard FTSE Europe and BetaShares Australian 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 BetaShares Australian Government are associated (or correlated) with Vanguard FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard FTSE Europe has no effect on the direction of BetaShares Australian i.e., BetaShares Australian and Vanguard FTSE go up and down completely randomly.
Pair Corralation between BetaShares Australian and Vanguard FTSE
Assuming the 90 days trading horizon BetaShares Australian Government is expected to generate 0.57 times more return on investment than Vanguard FTSE. However, BetaShares Australian Government is 1.75 times less risky than Vanguard FTSE. It trades about 0.06 of its potential returns per unit of risk. Vanguard FTSE Europe is currently generating about -0.03 per unit of risk. If you would invest 4,019 in BetaShares Australian Government on August 29, 2024 and sell it today you would earn a total of 109.00 from holding BetaShares Australian Government or generate 2.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BetaShares Australian Governme vs. Vanguard FTSE Europe
Performance |
| Timeline |
| BetaShares Australian |
| Vanguard FTSE Europe |
BetaShares Australian and Vanguard FTSE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BetaShares Australian and Vanguard FTSE
The main advantage of trading using opposite BetaShares Australian and Vanguard FTSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BetaShares Australian position performs unexpectedly, Vanguard FTSE 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 FTSE will offset losses from the drop in Vanguard FTSE's long position.The idea behind BetaShares Australian Government and Vanguard FTSE Europe 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.
| Vanguard FTSE vs. BetaShares Global Government | Vanguard FTSE vs. BetaShares Geared Australian | Vanguard FTSE vs. Global X Semiconductor | Vanguard FTSE vs. iShares UBS Government |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
Other Complementary Tools
| Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios | |
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum | |
| USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital |