Correlation Between Vanguard FTSE and Vanguard EUR
Can any of the company-specific risk be diversified away by investing in both Vanguard FTSE and Vanguard EUR 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 EUR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard FTSE All World and Vanguard EUR Eurozone, you can compare the effects of market volatilities on Vanguard FTSE and Vanguard EUR 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 EUR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard FTSE and Vanguard EUR.
Diversification Opportunities for Vanguard FTSE and Vanguard EUR
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Vanguard and Vanguard is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard FTSE All World and Vanguard EUR Eurozone in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard EUR Eurozone 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 All World are associated (or correlated) with Vanguard EUR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard EUR Eurozone has no effect on the direction of Vanguard FTSE i.e., Vanguard FTSE and Vanguard EUR go up and down completely randomly.
Pair Corralation between Vanguard FTSE and Vanguard EUR
Assuming the 90 days trading horizon Vanguard FTSE All World is expected to generate 1.5 times more return on investment than Vanguard EUR. However, Vanguard FTSE is 1.5 times more volatile than Vanguard EUR Eurozone. It trades about 0.08 of its potential returns per unit of risk. Vanguard EUR Eurozone is currently generating about 0.05 per unit of risk. If you would invest 5,141 in Vanguard FTSE All World on September 12, 2024 and sell it today you would earn a total of 1,450 from holding Vanguard FTSE All World or generate 28.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard FTSE All World vs. Vanguard EUR Eurozone
Performance |
| Timeline |
| Vanguard FTSE All |
| Vanguard EUR Eurozone |
Vanguard FTSE and Vanguard EUR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard FTSE and Vanguard EUR
The main advantage of trading using opposite Vanguard FTSE and Vanguard EUR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard FTSE position performs unexpectedly, Vanguard EUR 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 EUR will offset losses from the drop in Vanguard EUR's long position.| Vanguard FTSE vs. SPDR Dow Jones | Vanguard FTSE vs. iShares Core MSCI | Vanguard FTSE vs. iShares SP 500 | Vanguard FTSE vs. Vanguard FTSE All World |
| Vanguard EUR vs. Vanguard FTSE All World | Vanguard EUR vs. Vanguard FTSE Developed | Vanguard EUR vs. Vanguard FTSE All World | Vanguard EUR vs. Vanguard FTSE Developed |
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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