Correlation Between Vanguard FTSE and Merrill Lynch
Can any of the company-specific risk be diversified away by investing in both Vanguard FTSE and Merrill Lynch 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 Merrill Lynch 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 Merrill Lynch, you can compare the effects of market volatilities on Vanguard FTSE and Merrill Lynch 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 Merrill Lynch. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard FTSE and Merrill Lynch.
Diversification Opportunities for Vanguard FTSE and Merrill Lynch
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Vanguard and Merrill is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard FTSE Developed and Merrill Lynch in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merrill Lynch 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 Merrill Lynch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merrill Lynch has no effect on the direction of Vanguard FTSE i.e., Vanguard FTSE and Merrill Lynch go up and down completely randomly.
Pair Corralation between Vanguard FTSE and Merrill Lynch
Considering the 90-day investment horizon Vanguard FTSE Developed is expected to generate 0.06 times more return on investment than Merrill Lynch. However, Vanguard FTSE Developed is 17.02 times less risky than Merrill Lynch. It trades about 0.06 of its potential returns per unit of risk. Merrill Lynch is currently generating about -0.14 per unit of risk. If you would invest 4,056 in Vanguard FTSE Developed on September 2, 2024 and sell it today you would earn a total of 974.00 from holding Vanguard FTSE Developed or generate 24.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 9.68% |
| Values | Daily Returns |
Vanguard FTSE Developed vs. Merrill Lynch
Performance |
| Timeline |
| Vanguard FTSE Developed |
| Merrill Lynch |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Vanguard FTSE and Merrill Lynch Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard FTSE and Merrill Lynch
The main advantage of trading using opposite Vanguard FTSE and Merrill Lynch positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard FTSE position performs unexpectedly, Merrill Lynch 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 Merrill Lynch will offset losses from the drop in Merrill Lynch's long position.| Vanguard FTSE vs. Vanguard FTSE Emerging | Vanguard FTSE vs. Vanguard Small Cap Index | Vanguard FTSE vs. Vanguard Value Index | Vanguard FTSE vs. Vanguard Small Cap Value |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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