Correlation Between Vanguard Emerging and Western Asset
Can any of the company-specific risk be diversified away by investing in both Vanguard Emerging and Western Asset 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 Emerging and Western Asset into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Emerging Markets and Western Asset E, you can compare the effects of market volatilities on Vanguard Emerging and Western Asset 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 Emerging with a short position of Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Emerging and Western Asset.
Diversification Opportunities for Vanguard Emerging and Western Asset
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vanguard and Western is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Emerging Markets and Western Asset E in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset E and Vanguard Emerging 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 Emerging Markets are associated (or correlated) with Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset E has no effect on the direction of Vanguard Emerging i.e., Vanguard Emerging and Western Asset go up and down completely randomly.
Pair Corralation between Vanguard Emerging and Western Asset
Assuming the 90 days horizon Vanguard Emerging Markets is expected to generate 2.2 times more return on investment than Western Asset. However, Vanguard Emerging is 2.2 times more volatile than Western Asset E. It trades about 0.27 of its potential returns per unit of risk. Western Asset E is currently generating about 0.19 per unit of risk. If you would invest 2,774 in Vanguard Emerging Markets on November 27, 2024 and sell it today you would earn a total of 109.00 from holding Vanguard Emerging Markets or generate 3.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Emerging Markets vs. Western Asset E
Performance |
| Timeline |
| Vanguard Emerging Markets |
| Western Asset E |
Vanguard Emerging and Western Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Emerging and Western Asset
The main advantage of trading using opposite Vanguard Emerging and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Emerging position performs unexpectedly, Western Asset 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 Western Asset will offset losses from the drop in Western Asset's long position.| Vanguard Emerging vs. Jhancock Diversified Macro | Vanguard Emerging vs. Franklin Federal Limited Term | Vanguard Emerging vs. Rbc Emerging Markets | Vanguard Emerging vs. Aqr Sustainable Long Short |
| Western Asset vs. Valic Company I | Western Asset vs. T Rowe Price | Western Asset vs. T Rowe Price | Western Asset vs. Ultrasmall Cap Profund Ultrasmall Cap |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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