Correlation Between Vanguard European and Vanguard Emerging
Can any of the company-specific risk be diversified away by investing in both Vanguard European and Vanguard Emerging 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 European and Vanguard Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard European Stock and Vanguard Emerging Markets, you can compare the effects of market volatilities on Vanguard European and Vanguard Emerging 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 European with a short position of Vanguard Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard European and Vanguard Emerging.
Diversification Opportunities for Vanguard European and Vanguard Emerging
0.17 | Correlation Coefficient |
Average diversification
The 3 months correlation between Vanguard and Vanguard is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard European Stock and Vanguard Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Emerging Markets and Vanguard European 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 European Stock are associated (or correlated) with Vanguard Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Emerging Markets has no effect on the direction of Vanguard European i.e., Vanguard European and Vanguard Emerging go up and down completely randomly.
Pair Corralation between Vanguard European and Vanguard Emerging
Assuming the 90 days horizon Vanguard European Stock is expected to under-perform the Vanguard Emerging. But the mutual fund apears to be less risky and, when comparing its historical volatility, Vanguard European Stock is 1.02 times less risky than Vanguard Emerging. The mutual fund trades about -0.03 of its potential returns per unit of risk. The Vanguard Emerging Markets is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 3,603 in Vanguard Emerging Markets on August 31, 2024 and sell it today you would earn a total of 168.00 from holding Vanguard Emerging Markets or generate 4.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.21% |
| Values | Daily Returns |
Vanguard European Stock vs. Vanguard Emerging Markets
Performance |
| Timeline |
| Vanguard European Stock |
| Vanguard Emerging Markets |
Vanguard European and Vanguard Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard European and Vanguard Emerging
The main advantage of trading using opposite Vanguard European and Vanguard Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard European position performs unexpectedly, Vanguard Emerging 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 Emerging will offset losses from the drop in Vanguard Emerging's long position.| Vanguard European vs. Vanguard Pacific Stock | Vanguard European vs. Vanguard Emerging Markets | Vanguard European vs. Vanguard Reit Index | Vanguard European vs. Vanguard Small Cap Index |
| 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 |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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