Correlation Between Vanguard Total and Vanguard Emerging
Can any of the company-specific risk be diversified away by investing in both Vanguard Total and Vanguard Emerging 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 Total and Vanguard Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Total World and Vanguard Emerging Markets, you can compare the effects of market volatilities on Vanguard Total and Vanguard Emerging 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 Total with a short position of Vanguard Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Total and Vanguard Emerging.
Diversification Opportunities for Vanguard Total and Vanguard Emerging
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Vanguard and Vanguard is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total World and Vanguard Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Emerging Markets and Vanguard Total 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 Total World are associated (or correlated) with Vanguard Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Emerging Markets has no effect on the direction of Vanguard Total i.e., Vanguard Total and Vanguard Emerging go up and down completely randomly.
Pair Corralation between Vanguard Total and Vanguard Emerging
Given the investment horizon of 90 days Vanguard Total is expected to generate 1.27 times less return on investment than Vanguard Emerging. But when comparing it to its historical volatility, Vanguard Total World is 1.44 times less risky than Vanguard Emerging. It trades about 0.14 of its potential returns per unit of risk. Vanguard Emerging Markets is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 6,168 in Vanguard Emerging Markets on September 1, 2024 and sell it today you would earn a total of 357.00 from holding Vanguard Emerging Markets or generate 5.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Total World vs. Vanguard Emerging Markets
Performance |
| Timeline |
| Vanguard Total World |
| Vanguard Emerging Markets |
Vanguard Total and Vanguard Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Total and Vanguard Emerging
The main advantage of trading using opposite Vanguard Total and Vanguard Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Total position performs unexpectedly, Vanguard Emerging 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 Emerging will offset losses from the drop in Vanguard Emerging's long position.| Vanguard Total vs. iShares ESG USD | Vanguard Total vs. iShares ESG 1 5 | Vanguard Total vs. iShares ESG Aggregate | Vanguard Total vs. iShares ESG Aware |
| Vanguard Emerging vs. iShares JP Morgan | Vanguard Emerging vs. SPDR Bloomberg Barclays | Vanguard Emerging vs. SPDR DoubleLine Emerging | Vanguard Emerging vs. JPMorgan USD Emerging |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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