Correlation Between New World and Vanguard International
Can any of the company-specific risk be diversified away by investing in both New World and Vanguard International 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 New World and Vanguard International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between New World Fund and Vanguard International Growth, you can compare the effects of market volatilities on New World and Vanguard International 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 New World with a short position of Vanguard International. Check out your portfolio center. Please also check ongoing floating volatility patterns of New World and Vanguard International.
Diversification Opportunities for New World and Vanguard International
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between New and Vanguard is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding New World Fund and Vanguard International Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard International and New World 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 New World Fund are associated (or correlated) with Vanguard International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard International has no effect on the direction of New World i.e., New World and Vanguard International go up and down completely randomly.
Pair Corralation between New World and Vanguard International
Assuming the 90 days horizon New World Fund is expected to under-perform the Vanguard International. But the mutual fund apears to be less risky and, when comparing its historical volatility, New World Fund is 1.21 times less risky than Vanguard International. The mutual fund trades about -0.1 of its potential returns per unit of risk. The Vanguard International Growth is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 3,599 in Vanguard International Growth on September 1, 2024 and sell it today you would earn a total of 25.00 from holding Vanguard International Growth or generate 0.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
New World Fund vs. Vanguard International Growth
Performance |
| Timeline |
| New World Fund |
| Vanguard International |
New World and Vanguard International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New World and Vanguard International
The main advantage of trading using opposite New World and Vanguard International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New World position performs unexpectedly, Vanguard International 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 International will offset losses from the drop in Vanguard International's long position.| New World vs. Smallcap World Fund | New World vs. Investment Of America | New World vs. Europacific Growth Fund | New World vs. Capital World Growth |
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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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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