Correlation Between Vanguard Global and Vanguard Developed
Can any of the company-specific risk be diversified away by investing in both Vanguard Global and Vanguard Developed 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 Global and Vanguard Developed into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Global Ex Us and Vanguard Developed Markets, you can compare the effects of market volatilities on Vanguard Global and Vanguard Developed 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 Global with a short position of Vanguard Developed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Global and Vanguard Developed.
Diversification Opportunities for Vanguard Global and Vanguard Developed
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vanguard and Vanguard is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Global Ex Us and Vanguard Developed Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Developed and Vanguard Global 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 Global Ex Us are associated (or correlated) with Vanguard Developed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Developed has no effect on the direction of Vanguard Global i.e., Vanguard Global and Vanguard Developed go up and down completely randomly.
Pair Corralation between Vanguard Global and Vanguard Developed
Assuming the 90 days horizon Vanguard Global Ex Us is expected to under-perform the Vanguard Developed. In addition to that, Vanguard Global is 1.03 times more volatile than Vanguard Developed Markets. It trades about -0.19 of its total potential returns per unit of risk. Vanguard Developed Markets is currently generating about -0.17 per unit of volatility. If you would invest 1,633 in Vanguard Developed Markets on August 28, 2024 and sell it today you would lose (44.00) from holding Vanguard Developed Markets or give up 2.69% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Global Ex Us vs. Vanguard Developed Markets
Performance |
| Timeline |
| Vanguard Global Ex |
| Vanguard Developed |
Vanguard Global and Vanguard Developed Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Global and Vanguard Developed
The main advantage of trading using opposite Vanguard Global and Vanguard Developed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Global position performs unexpectedly, Vanguard Developed 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 Developed will offset losses from the drop in Vanguard Developed's long position.| Vanguard Global vs. Vanguard Materials Index | Vanguard Global vs. Vanguard Limited Term Tax Exempt | Vanguard Global vs. Vanguard Limited Term Tax Exempt | Vanguard Global vs. Vanguard Global Minimum |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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