Correlation Between Vanguard International and Vanguard Emerging
Can any of the company-specific risk be diversified away by investing in both Vanguard International 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 International 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 International Dividend and Vanguard Emerging Markets, you can compare the effects of market volatilities on Vanguard International 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 International with a short position of Vanguard Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard International and Vanguard Emerging.
Diversification Opportunities for Vanguard International and Vanguard Emerging
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vanguard and Vanguard is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard International Dividen 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 International 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 International Dividend 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 International i.e., Vanguard International and Vanguard Emerging go up and down completely randomly.
Pair Corralation between Vanguard International and Vanguard Emerging
Assuming the 90 days horizon Vanguard International is expected to generate 1.33 times less return on investment than Vanguard Emerging. But when comparing it to its historical volatility, Vanguard International Dividend is 1.1 times less risky than Vanguard Emerging. It trades about 0.04 of its potential returns per unit of risk. Vanguard Emerging Markets is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 3,520 in Vanguard Emerging Markets on November 28, 2024 and sell it today you would earn a total of 264.00 from holding Vanguard Emerging Markets or generate 7.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard International Dividen vs. Vanguard Emerging Markets
Performance |
| Timeline |
| Vanguard International |
| Vanguard Emerging Markets |
Vanguard International and Vanguard Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard International and Vanguard Emerging
The main advantage of trading using opposite Vanguard International and Vanguard Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard International 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.The idea behind Vanguard International Dividend and Vanguard Emerging Markets pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
| 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
Other Complementary Tools
| Headlines Timeline Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity | |
| Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities | |
| My Watchlist Analysis Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like | |
| Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets |