Correlation Between Vanguard FTSE and Vanguard LifeStrategy
Can any of the company-specific risk be diversified away by investing in both Vanguard FTSE and Vanguard LifeStrategy 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 LifeStrategy 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 Vanguard LifeStrategy 20, you can compare the effects of market volatilities on Vanguard FTSE and Vanguard LifeStrategy 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 LifeStrategy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard FTSE and Vanguard LifeStrategy.
Diversification Opportunities for Vanguard FTSE and Vanguard LifeStrategy
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Vanguard and Vanguard is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard FTSE Developed and Vanguard LifeStrategy 20 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard LifeStrategy 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 Vanguard LifeStrategy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard LifeStrategy has no effect on the direction of Vanguard FTSE i.e., Vanguard FTSE and Vanguard LifeStrategy go up and down completely randomly.
Pair Corralation between Vanguard FTSE and Vanguard LifeStrategy
Assuming the 90 days trading horizon Vanguard FTSE Developed is expected to generate 2.6 times more return on investment than Vanguard LifeStrategy. However, Vanguard FTSE is 2.6 times more volatile than Vanguard LifeStrategy 20. It trades about 0.09 of its potential returns per unit of risk. Vanguard LifeStrategy 20 is currently generating about 0.15 per unit of risk. If you would invest 3,356 in Vanguard FTSE Developed on September 1, 2024 and sell it today you would earn a total of 587.00 from holding Vanguard FTSE Developed or generate 17.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard FTSE Developed vs. Vanguard LifeStrategy 20
Performance |
| Timeline |
| Vanguard FTSE Developed |
| Vanguard LifeStrategy |
Vanguard FTSE and Vanguard LifeStrategy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard FTSE and Vanguard LifeStrategy
The main advantage of trading using opposite Vanguard FTSE and Vanguard LifeStrategy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard FTSE position performs unexpectedly, Vanguard LifeStrategy 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 LifeStrategy will offset losses from the drop in Vanguard LifeStrategy's long position.| Vanguard FTSE vs. Vanguard FTSE Developed | Vanguard FTSE vs. Vanguard FTSE Emerging | Vanguard FTSE vs. iShares Core FTSE | Vanguard FTSE vs. HSBC MSCI Japan |
| Vanguard LifeStrategy vs. Vanguard SP 500 | Vanguard LifeStrategy vs. SPDR Dow Jones | Vanguard LifeStrategy vs. iShares Core MSCI | Vanguard LifeStrategy vs. iShares SP 500 |
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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