Correlation Between OShares Europe and Vanguard FTSE
Can any of the company-specific risk be diversified away by investing in both OShares Europe 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 OShares Europe and Vanguard FTSE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between OShares Europe Quality and Vanguard FTSE Pacific, you can compare the effects of market volatilities on OShares Europe 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 OShares Europe with a short position of Vanguard FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of OShares Europe and Vanguard FTSE.
Diversification Opportunities for OShares Europe and Vanguard FTSE
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between OShares and Vanguard is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding OShares Europe Quality and Vanguard FTSE Pacific in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard FTSE Pacific and OShares Europe 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 OShares Europe Quality 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 Pacific has no effect on the direction of OShares Europe i.e., OShares Europe and Vanguard FTSE go up and down completely randomly.
Pair Corralation between OShares Europe and Vanguard FTSE
Given the investment horizon of 90 days OShares Europe Quality is expected to generate 0.94 times more return on investment than Vanguard FTSE. However, OShares Europe Quality is 1.07 times less risky than Vanguard FTSE. It trades about 0.06 of its potential returns per unit of risk. Vanguard FTSE Pacific is currently generating about 0.04 per unit of risk. If you would invest 2,337 in OShares Europe Quality on September 3, 2024 and sell it today you would earn a total of 599.00 from holding OShares Europe Quality or generate 25.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
OShares Europe Quality vs. Vanguard FTSE Pacific
Performance |
| Timeline |
| OShares Europe Quality |
| Vanguard FTSE Pacific |
OShares Europe and Vanguard FTSE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with OShares Europe and Vanguard FTSE
The main advantage of trading using opposite OShares Europe and Vanguard FTSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if OShares Europe 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.| OShares Europe vs. Vanguard FTSE Pacific | OShares Europe vs. Vanguard FTSE Emerging | OShares Europe vs. Vanguard FTSE All World | OShares Europe vs. Vanguard FTSE Developed |
| Vanguard FTSE vs. Vanguard FTSE Europe | Vanguard FTSE vs. Vanguard Large Cap Index | Vanguard FTSE vs. Vanguard Materials Index | Vanguard FTSE vs. Vanguard FTSE All World |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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