Correlation Between Vanguard LifeStrategy and Vanguard FTSE
Can any of the company-specific risk be diversified away by investing in both Vanguard LifeStrategy 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 Vanguard LifeStrategy and Vanguard FTSE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard LifeStrategy 20 and Vanguard FTSE All World, you can compare the effects of market volatilities on Vanguard LifeStrategy 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 Vanguard LifeStrategy with a short position of Vanguard FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard LifeStrategy and Vanguard FTSE.
Diversification Opportunities for Vanguard LifeStrategy and Vanguard FTSE
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Vanguard and Vanguard is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard LifeStrategy 20 and Vanguard FTSE All World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard FTSE All and Vanguard LifeStrategy 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 LifeStrategy 20 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 All has no effect on the direction of Vanguard LifeStrategy i.e., Vanguard LifeStrategy and Vanguard FTSE go up and down completely randomly.
Pair Corralation between Vanguard LifeStrategy and Vanguard FTSE
Assuming the 90 days trading horizon Vanguard LifeStrategy is expected to generate 3.63 times less return on investment than Vanguard FTSE. But when comparing it to its historical volatility, Vanguard LifeStrategy 20 is 2.7 times less risky than Vanguard FTSE. It trades about 0.12 of its potential returns per unit of risk. Vanguard FTSE All World is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 10,345 in Vanguard FTSE All World on August 29, 2024 and sell it today you would earn a total of 3,035 from holding Vanguard FTSE All World or generate 29.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard LifeStrategy 20 vs. Vanguard FTSE All World
Performance |
| Timeline |
| Vanguard LifeStrategy |
| Vanguard FTSE All |
Vanguard LifeStrategy and Vanguard FTSE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard LifeStrategy and Vanguard FTSE
The main advantage of trading using opposite Vanguard LifeStrategy and Vanguard FTSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard LifeStrategy 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.| Vanguard LifeStrategy vs. Vanguard FTSE All World | Vanguard LifeStrategy vs. Vanguard FTSE Developed | Vanguard LifeStrategy vs. Vanguard FTSE All World | Vanguard LifeStrategy vs. Vanguard FTSE Developed |
| Vanguard FTSE vs. Vanguard FTSE Developed | Vanguard FTSE vs. Vanguard FTSE All World | Vanguard FTSE vs. Vanguard FTSE Developed | Vanguard FTSE vs. Vanguard Funds PLC |
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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