Correlation Between Vanguard Total and Vanguard Developed
Can any of the company-specific risk be diversified away by investing in both Vanguard Total and Vanguard Developed 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 Total and Vanguard Developed into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Total Bond and Vanguard Developed Markets, you can compare the effects of market volatilities on Vanguard Total and Vanguard Developed 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 Total with a short position of Vanguard Developed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Total and Vanguard Developed.
Diversification Opportunities for Vanguard Total and Vanguard Developed
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vanguard and VANGUARD is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Bond and Vanguard Developed Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Developed and Vanguard Total 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 Total Bond are associated (or correlated) with Vanguard Developed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Developed has no effect on the direction of Vanguard Total i.e., Vanguard Total and Vanguard Developed go up and down completely randomly.
Pair Corralation between Vanguard Total and Vanguard Developed
Assuming the 90 days horizon Vanguard Total is expected to generate 3.19 times less return on investment than Vanguard Developed. But when comparing it to its historical volatility, Vanguard Total Bond is 1.97 times less risky than Vanguard Developed. It trades about 0.04 of its potential returns per unit of risk. Vanguard Developed Markets is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 1,304 in Vanguard Developed Markets on September 2, 2024 and sell it today you would earn a total of 312.00 from holding Vanguard Developed Markets or generate 23.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Total Bond vs. Vanguard Developed Markets
Performance |
| Timeline |
| Vanguard Total Bond |
| Vanguard Developed |
Vanguard Total and Vanguard Developed Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Total and Vanguard Developed
The main advantage of trading using opposite Vanguard Total and Vanguard Developed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Total position performs unexpectedly, Vanguard Developed 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 Developed will offset losses from the drop in Vanguard Developed's long position.| Vanguard Total vs. Vanguard Total International | Vanguard Total vs. Vanguard Extended Market | Vanguard Total vs. Vanguard Small Cap Index | Vanguard Total vs. Vanguard Institutional Index |
| Vanguard Developed vs. Vanguard Emerging Markets | Vanguard Developed vs. Vanguard Small Cap Index | Vanguard Developed vs. Vanguard Total Bond | Vanguard Developed vs. Vanguard Mid Cap Index |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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