Correlation Between Vanguard Small and Xtrackers FTSE
Can any of the company-specific risk be diversified away by investing in both Vanguard Small and Xtrackers 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 Small and Xtrackers FTSE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Small Cap Index and Xtrackers FTSE Developed, you can compare the effects of market volatilities on Vanguard Small and Xtrackers 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 Small with a short position of Xtrackers FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small and Xtrackers FTSE.
Diversification Opportunities for Vanguard Small and Xtrackers FTSE
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Vanguard and Xtrackers is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Index and Xtrackers FTSE Developed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers FTSE Developed and Vanguard Small 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 Small Cap Index are associated (or correlated) with Xtrackers FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers FTSE Developed has no effect on the direction of Vanguard Small i.e., Vanguard Small and Xtrackers FTSE go up and down completely randomly.
Pair Corralation between Vanguard Small and Xtrackers FTSE
Allowing for the 90-day total investment horizon Vanguard Small Cap Index is expected to generate 1.36 times more return on investment than Xtrackers FTSE. However, Vanguard Small is 1.36 times more volatile than Xtrackers FTSE Developed. It trades about 0.2 of its potential returns per unit of risk. Xtrackers FTSE Developed is currently generating about -0.06 per unit of risk. If you would invest 22,572 in Vanguard Small Cap Index on September 12, 2024 and sell it today you would earn a total of 2,895 from holding Vanguard Small Cap Index or generate 12.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Small Cap Index vs. Xtrackers FTSE Developed
Performance |
| Timeline |
| Vanguard Small Cap |
| Xtrackers FTSE Developed |
Vanguard Small and Xtrackers FTSE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Small and Xtrackers FTSE
The main advantage of trading using opposite Vanguard Small and Xtrackers FTSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Small position performs unexpectedly, Xtrackers 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 Xtrackers FTSE will offset losses from the drop in Xtrackers FTSE's long position.| Vanguard Small vs. Vanguard Mid Cap Index | Vanguard Small vs. Vanguard Small Cap Value | Vanguard Small vs. Vanguard FTSE Emerging | Vanguard Small vs. Vanguard Large Cap Index |
| Xtrackers FTSE vs. Xtrackers Russell Multifactor | Xtrackers FTSE vs. Xtrackers MSCI All | Xtrackers FTSE vs. WisdomTree Dynamic Currency | Xtrackers FTSE vs. Xtrackers MSCI Eurozone |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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