Correlation Between Vanguard Global and Vanguard Emerging
Can any of the company-specific risk be diversified away by investing in both Vanguard Global 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 Global 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 Global Wellesley and Vanguard Emerging Markets, you can compare the effects of market volatilities on Vanguard Global 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 Global with a short position of Vanguard Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Global and Vanguard Emerging.
Diversification Opportunities for Vanguard Global and Vanguard Emerging
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vanguard and Vanguard is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Global Wellesley 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 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 Wellesley 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 Global i.e., Vanguard Global and Vanguard Emerging go up and down completely randomly.
Pair Corralation between Vanguard Global and Vanguard Emerging
Assuming the 90 days horizon Vanguard Global is expected to generate 1.15 times less return on investment than Vanguard Emerging. In addition to that, Vanguard Global is 1.16 times more volatile than Vanguard Emerging Markets. It trades about 0.12 of its total potential returns per unit of risk. Vanguard Emerging Markets is currently generating about 0.16 per unit of volatility. If you would invest 968.00 in Vanguard Emerging Markets on September 1, 2024 and sell it today you would earn a total of 53.00 from holding Vanguard Emerging Markets or generate 5.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.21% |
| Values | Daily Returns |
Vanguard Global Wellesley vs. Vanguard Emerging Markets
Performance |
| Timeline |
| Vanguard Global Wellesley |
| Vanguard Emerging Markets |
Vanguard Global and Vanguard Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Global and Vanguard Emerging
The main advantage of trading using opposite Vanguard Global and Vanguard Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Global 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 Global vs. Vanguard Global Wellington | Vanguard Global vs. Vanguard International Core | Vanguard Global vs. Vanguard Global Minimum | Vanguard Global vs. Vanguard E Bond |
| Vanguard Emerging vs. Vanguard E Bond | Vanguard Emerging vs. Vanguard Emerging Markets | Vanguard Emerging vs. Vanguard Ultra Short Term Bond | Vanguard Emerging vs. Vanguard Emerging Markets |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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