Correlation Between Vanguard Australian and Vanguard FTSE
Can any of the company-specific risk be diversified away by investing in both Vanguard 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 Vanguard 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 Vanguard Australian Fixed and Vanguard FTSE Europe, you can compare the effects of market volatilities on Vanguard 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 Vanguard Australian with a short position of Vanguard FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Australian and Vanguard FTSE.
Diversification Opportunities for Vanguard Australian and Vanguard FTSE
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Vanguard and Vanguard is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Australian Fixed 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 Vanguard 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 Vanguard Australian Fixed 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 Vanguard Australian i.e., Vanguard Australian and Vanguard FTSE go up and down completely randomly.
Pair Corralation between Vanguard Australian and Vanguard FTSE
Assuming the 90 days trading horizon Vanguard Australian Fixed is expected to generate 0.37 times more return on investment than Vanguard FTSE. However, Vanguard Australian Fixed is 2.69 times less risky than Vanguard FTSE. It trades about -0.18 of its potential returns per unit of risk. Vanguard FTSE Europe is currently generating about -0.11 per unit of risk. If you would invest 4,610 in Vanguard Australian Fixed on August 25, 2024 and sell it today you would lose (93.00) from holding Vanguard Australian Fixed or give up 2.02% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Australian Fixed vs. Vanguard FTSE Europe
Performance |
| Timeline |
| Vanguard Australian Fixed |
| Vanguard FTSE Europe |
Vanguard Australian and Vanguard FTSE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Australian and Vanguard FTSE
The main advantage of trading using opposite Vanguard Australian and Vanguard FTSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard 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.| Vanguard Australian vs. iShares Core SP | Vanguard Australian vs. iShares CoreSP MidCap | Vanguard Australian vs. SPDR SP 500 | Vanguard Australian vs. iShares Core SP |
| 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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