Correlation Between Vanguard Developed and International Equities
Can any of the company-specific risk be diversified away by investing in both Vanguard Developed and International Equities 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 Developed and International Equities into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Developed Markets and International Equities Index, you can compare the effects of market volatilities on Vanguard Developed and International Equities 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 Developed with a short position of International Equities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Developed and International Equities.
Diversification Opportunities for Vanguard Developed and International Equities
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Vanguard and International is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Developed Markets and International Equities Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Equities and Vanguard Developed 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 Developed Markets are associated (or correlated) with International Equities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Equities has no effect on the direction of Vanguard Developed i.e., Vanguard Developed and International Equities go up and down completely randomly.
Pair Corralation between Vanguard Developed and International Equities
Assuming the 90 days horizon Vanguard Developed Markets is expected to generate 0.98 times more return on investment than International Equities. However, Vanguard Developed Markets is 1.02 times less risky than International Equities. It trades about 0.05 of its potential returns per unit of risk. International Equities Index is currently generating about 0.05 per unit of risk. If you would invest 1,011 in Vanguard Developed Markets on August 31, 2024 and sell it today you would earn a total of 224.00 from holding Vanguard Developed Markets or generate 22.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Developed Markets vs. International Equities Index
Performance |
| Timeline |
| Vanguard Developed |
| International Equities |
Vanguard Developed and International Equities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Developed and International Equities
The main advantage of trading using opposite Vanguard Developed and International Equities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Developed position performs unexpectedly, International Equities 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 International Equities will offset losses from the drop in International Equities' long position.| Vanguard Developed vs. Old Westbury Municipal | Vanguard Developed vs. T Rowe Price | Vanguard Developed vs. Franklin High Yield | Vanguard Developed vs. The National Tax Free |
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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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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