Correlation Between Vanguard FTSE and Vanguard Diversified
Can any of the company-specific risk be diversified away by investing in both Vanguard FTSE and Vanguard Diversified 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 Diversified into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard FTSE Europe and Vanguard Diversified High, you can compare the effects of market volatilities on Vanguard FTSE and Vanguard Diversified 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 Diversified. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard FTSE and Vanguard Diversified.
Diversification Opportunities for Vanguard FTSE and Vanguard Diversified
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Vanguard and Vanguard is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard FTSE Europe and Vanguard Diversified High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Diversified High 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 Europe are associated (or correlated) with Vanguard Diversified. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Diversified High has no effect on the direction of Vanguard FTSE i.e., Vanguard FTSE and Vanguard Diversified go up and down completely randomly.
Pair Corralation between Vanguard FTSE and Vanguard Diversified
Assuming the 90 days trading horizon Vanguard FTSE Europe is expected to under-perform the Vanguard Diversified. In addition to that, Vanguard FTSE is 1.43 times more volatile than Vanguard Diversified High. It trades about -0.11 of its total potential returns per unit of risk. Vanguard Diversified High is currently generating about 0.19 per unit of volatility. If you would invest 6,593 in Vanguard Diversified High on August 25, 2024 and sell it today you would earn a total of 264.00 from holding Vanguard Diversified High or generate 4.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard FTSE Europe vs. Vanguard Diversified High
Performance |
| Timeline |
| Vanguard FTSE Europe |
| Vanguard Diversified High |
Vanguard FTSE and Vanguard Diversified Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard FTSE and Vanguard Diversified
The main advantage of trading using opposite Vanguard FTSE and Vanguard Diversified positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard FTSE position performs unexpectedly, Vanguard Diversified 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 Diversified will offset losses from the drop in Vanguard Diversified's long position.| Vanguard FTSE vs. BetaShares Global Government | Vanguard FTSE vs. BetaShares Geared Australian | Vanguard FTSE vs. Global X Semiconductor | Vanguard FTSE vs. iShares UBS Government |
| Vanguard Diversified vs. Betashares Asia Technology | Vanguard Diversified vs. CD Private Equity | Vanguard Diversified vs. BetaShares Australia 200 | Vanguard Diversified vs. Australian High Interest |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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