Correlation Between Vanguard FTSE and Vanguard Dividend
Can any of the company-specific risk be diversified away by investing in both Vanguard FTSE and Vanguard Dividend 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 FTSE and Vanguard Dividend into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard FTSE Developed and Vanguard Dividend Appreciation, you can compare the effects of market volatilities on Vanguard FTSE and Vanguard Dividend 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 FTSE with a short position of Vanguard Dividend. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard FTSE and Vanguard Dividend.
Diversification Opportunities for Vanguard FTSE and Vanguard Dividend
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Vanguard and Vanguard is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard FTSE Developed and Vanguard Dividend Appreciation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Dividend and Vanguard FTSE 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 FTSE Developed are associated (or correlated) with Vanguard Dividend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Dividend has no effect on the direction of Vanguard FTSE i.e., Vanguard FTSE and Vanguard Dividend go up and down completely randomly.
Pair Corralation between Vanguard FTSE and Vanguard Dividend
Assuming the 90 days trading horizon Vanguard FTSE is expected to generate 1.23 times less return on investment than Vanguard Dividend. But when comparing it to its historical volatility, Vanguard FTSE Developed is 1.02 times less risky than Vanguard Dividend. It trades about 0.07 of its potential returns per unit of risk. Vanguard Dividend Appreciation is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 5,037 in Vanguard Dividend Appreciation on August 24, 2024 and sell it today you would earn a total of 1,509 from holding Vanguard Dividend Appreciation or generate 29.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard FTSE Developed vs. Vanguard Dividend Appreciation
Performance |
| Timeline |
| Vanguard FTSE Developed |
| Vanguard Dividend |
Vanguard FTSE and Vanguard Dividend Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard FTSE and Vanguard Dividend
The main advantage of trading using opposite Vanguard FTSE and Vanguard Dividend positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard FTSE position performs unexpectedly, Vanguard Dividend 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 Dividend will offset losses from the drop in Vanguard Dividend's long position.| Vanguard FTSE vs. Vanguard FTSE Emerging | Vanguard FTSE vs. Vanguard FTSE Developed | Vanguard FTSE vs. Vanguard Total Market | Vanguard FTSE vs. Vanguard Canadian Aggregate |
| Vanguard Dividend vs. Vanguard Dividend Appreciation | Vanguard Dividend vs. Vanguard Total Market | Vanguard Dividend vs. Vanguard FTSE Developed | Vanguard Dividend vs. Vanguard FTSE Developed |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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