Correlation Between Vanguard Inflation-protec and Vanguard International
Can any of the company-specific risk be diversified away by investing in both Vanguard Inflation-protec 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 Vanguard Inflation-protec and Vanguard International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Inflation Protected Securities and Vanguard International Dividend, you can compare the effects of market volatilities on Vanguard Inflation-protec 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 Vanguard Inflation-protec with a short position of Vanguard International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Inflation-protec and Vanguard International.
Diversification Opportunities for Vanguard Inflation-protec and Vanguard International
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Vanguard and Vanguard is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Inflation Protected S and Vanguard International Dividen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard International and Vanguard Inflation-protec 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 Inflation Protected Securities 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 Vanguard Inflation-protec i.e., Vanguard Inflation-protec and Vanguard International go up and down completely randomly.
Pair Corralation between Vanguard Inflation-protec and Vanguard International
Assuming the 90 days horizon Vanguard Inflation Protected Securities is expected to generate 0.41 times more return on investment than Vanguard International. However, Vanguard Inflation Protected Securities is 2.46 times less risky than Vanguard International. It trades about 0.07 of its potential returns per unit of risk. Vanguard International Dividend is currently generating about 0.03 per unit of risk. If you would invest 2,318 in Vanguard Inflation Protected Securities on September 1, 2024 and sell it today you would earn a total of 10.00 from holding Vanguard Inflation Protected Securities or generate 0.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Vanguard Inflation Protected S vs. Vanguard International Dividen
Performance |
| Timeline |
| Vanguard Inflation-protec |
| Vanguard International |
Vanguard Inflation-protec and Vanguard International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Inflation-protec and Vanguard International
The main advantage of trading using opposite Vanguard Inflation-protec and Vanguard International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Inflation-protec 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.The idea behind Vanguard Inflation Protected Securities and Vanguard International Dividend pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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.
Other Complementary Tools
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
| Fundamentals Comparison Compare fundamentals across multiple equities to find investing opportunities | |
| Equity Analysis Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities | |
| Top Crypto Exchanges Search and analyze digital assets across top global cryptocurrency exchanges |