Correlation Between Vanguard Emerging and Vanguard Total
Can any of the company-specific risk be diversified away by investing in both Vanguard Emerging 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 Emerging 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 Emerging Markets and Vanguard Total International, you can compare the effects of market volatilities on Vanguard Emerging 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 Emerging with a short position of Vanguard Total. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Emerging and Vanguard Total.
Diversification Opportunities for Vanguard Emerging and Vanguard Total
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vanguard and Vanguard is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Emerging Markets and Vanguard Total International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Total Inter 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 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 Inter has no effect on the direction of Vanguard Emerging i.e., Vanguard Emerging and Vanguard Total go up and down completely randomly.
Pair Corralation between Vanguard Emerging and Vanguard Total
Assuming the 90 days horizon Vanguard Emerging Markets is expected to under-perform the Vanguard Total. In addition to that, Vanguard Emerging is 1.09 times more volatile than Vanguard Total International. It trades about -0.1 of its total potential returns per unit of risk. Vanguard Total International is currently generating about 0.01 per unit of volatility. If you would invest 13,334 in Vanguard Total International on September 5, 2024 and sell it today you would earn a total of 10.00 from holding Vanguard Total International or generate 0.07% 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. Vanguard Total International
Performance |
Timeline |
Vanguard Emerging Markets |
Vanguard Total Inter |
Vanguard Emerging and Vanguard Total Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Vanguard Emerging and Vanguard Total
The main advantage of trading using opposite Vanguard Emerging and Vanguard Total positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Emerging 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 Emerging vs. Vanguard Developed Markets | Vanguard Emerging vs. Vanguard Reit Index | Vanguard Emerging vs. Vanguard Small Cap Index | Vanguard Emerging vs. Vanguard European Stock |
Vanguard Total vs. Vanguard Intermediate Term Porate | Vanguard Total vs. Vanguard Emerging Markets | Vanguard Total vs. Vanguard Small Cap Value | Vanguard Total vs. Vanguard European Stock |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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