Correlation Between Vanguard FTSE and Vanguard Total
Can any of the company-specific risk be diversified away by investing in both Vanguard FTSE and Vanguard Total 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 Total into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard FTSE Emerging and Vanguard Total Market, you can compare the effects of market volatilities on Vanguard FTSE and Vanguard Total 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 Total. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard FTSE and Vanguard Total.
Diversification Opportunities for Vanguard FTSE and Vanguard Total
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vanguard and Vanguard is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard FTSE Emerging and Vanguard Total Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Total Market 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 Emerging are associated (or correlated) with Vanguard Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Total Market has no effect on the direction of Vanguard FTSE i.e., Vanguard FTSE and Vanguard Total go up and down completely randomly.
Pair Corralation between Vanguard FTSE and Vanguard Total
Assuming the 90 days trading horizon Vanguard FTSE is expected to generate 2.19 times less return on investment than Vanguard Total. In addition to that, Vanguard FTSE is 1.06 times more volatile than Vanguard Total Market. It trades about 0.05 of its total potential returns per unit of risk. Vanguard Total Market is currently generating about 0.13 per unit of volatility. If you would invest 7,220 in Vanguard Total Market on August 24, 2024 and sell it today you would earn a total of 4,056 from holding Vanguard Total Market or generate 56.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard FTSE Emerging vs. Vanguard Total Market
Performance |
| Timeline |
| Vanguard FTSE Emerging |
| Vanguard Total Market |
Vanguard FTSE and Vanguard Total Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard FTSE and Vanguard Total
The main advantage of trading using opposite Vanguard FTSE and Vanguard Total positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard FTSE position performs unexpectedly, Vanguard Total 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 Total will offset losses from the drop in Vanguard Total's long position.| Vanguard FTSE vs. iShares MSCI Min | Vanguard FTSE vs. iShares MSCI Min | Vanguard FTSE vs. iShares Floating Rate | Vanguard FTSE vs. BMO Aggregate Bond |
| Vanguard Total vs. iShares Core SP | Vanguard Total vs. BMO SP 500 | Vanguard Total vs. Global X SP | Vanguard Total vs. iShares Core SP |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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