Correlation Between Vanguard MSCI and Vanguard Diversified
Can any of the company-specific risk be diversified away by investing in both Vanguard MSCI 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 MSCI 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 MSCI International and Vanguard Diversified High, you can compare the effects of market volatilities on Vanguard MSCI 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 MSCI with a short position of Vanguard Diversified. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard MSCI and Vanguard Diversified.
Diversification Opportunities for Vanguard MSCI and Vanguard Diversified
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vanguard and Vanguard is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard MSCI International 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 MSCI 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 MSCI International 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 MSCI i.e., Vanguard MSCI and Vanguard Diversified go up and down completely randomly.
Pair Corralation between Vanguard MSCI and Vanguard Diversified
Assuming the 90 days trading horizon Vanguard MSCI International is expected to generate 1.2 times more return on investment than Vanguard Diversified. However, Vanguard MSCI is 1.2 times more volatile than Vanguard Diversified High. It trades about 0.14 of its potential returns per unit of risk. Vanguard Diversified High is currently generating about 0.11 per unit of risk. If you would invest 8,911 in Vanguard MSCI International on August 29, 2024 and sell it today you would earn a total of 4,763 from holding Vanguard MSCI International or generate 53.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard MSCI International vs. Vanguard Diversified High
Performance |
| Timeline |
| Vanguard MSCI Intern |
| Vanguard Diversified High |
Vanguard MSCI and Vanguard Diversified Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard MSCI and Vanguard Diversified
The main advantage of trading using opposite Vanguard MSCI and Vanguard Diversified positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard MSCI 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 MSCI vs. Vanguard Global Minimum | Vanguard MSCI vs. Vanguard Global Aggregate | Vanguard MSCI vs. Vanguard Australian Fixed | Vanguard MSCI vs. Vanguard Global Infrastructure |
| Vanguard Diversified vs. Beta Shares SPASX | Vanguard Diversified vs. Vanguard Total Market | Vanguard Diversified vs. iShares SP 500 | Vanguard Diversified vs. SPDR 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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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