Correlation Between Vanguard Australian and Global X
Can any of the company-specific risk be diversified away by investing in both Vanguard Australian and Global X 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 Global X into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Australian Shares and Global X Physical, you can compare the effects of market volatilities on Vanguard Australian and Global X 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 Global X. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Australian and Global X.
Diversification Opportunities for Vanguard Australian and Global X
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vanguard and Global is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Australian Shares and Global X Physical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Physical 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 Shares are associated (or correlated) with Global X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global X Physical has no effect on the direction of Vanguard Australian i.e., Vanguard Australian and Global X go up and down completely randomly.
Pair Corralation between Vanguard Australian and Global X
Assuming the 90 days trading horizon Vanguard Australian Shares is expected to generate 0.41 times more return on investment than Global X. However, Vanguard Australian Shares is 2.43 times less risky than Global X. It trades about 0.2 of its potential returns per unit of risk. Global X Physical is currently generating about -0.09 per unit of risk. If you would invest 10,190 in Vanguard Australian Shares on August 26, 2024 and sell it today you would earn a total of 243.00 from holding Vanguard Australian Shares or generate 2.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Vanguard Australian Shares vs. Global X Physical
Performance |
| Timeline |
| Vanguard Australian |
| Global X Physical |
Vanguard Australian and Global X Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Australian and Global X
The main advantage of trading using opposite Vanguard Australian and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Australian position performs unexpectedly, Global X 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 Global X will offset losses from the drop in Global X'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 |
| Global X vs. CD Private Equity | Global X vs. SPDR SPASX 200 | Global X vs. Ecofibre | Global X vs. iShares Global Healthcare |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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