Correlation Between Vanguard International and Vanguard Developed
Can any of the company-specific risk be diversified away by investing in both Vanguard International 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 International 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 International Dividend and Vanguard Developed Markets, you can compare the effects of market volatilities on Vanguard International 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 International with a short position of Vanguard Developed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard International and Vanguard Developed.
Diversification Opportunities for Vanguard International 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 International Dividen 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 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 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 International i.e., Vanguard International and Vanguard Developed go up and down completely randomly.
Pair Corralation between Vanguard International and Vanguard Developed
Assuming the 90 days horizon Vanguard International Dividend is expected to generate 0.91 times more return on investment than Vanguard Developed. However, Vanguard International Dividend is 1.09 times less risky than Vanguard Developed. It trades about 0.04 of its potential returns per unit of risk. Vanguard Developed Markets is currently generating about 0.03 per unit of risk. If you would invest 3,906 in Vanguard International Dividend on November 28, 2024 and sell it today you would earn a total of 216.00 from holding Vanguard International Dividend or generate 5.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard International Dividen vs. Vanguard Developed Markets
Performance |
| Timeline |
| Vanguard International |
| Vanguard Developed |
Vanguard International and Vanguard Developed Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard International and Vanguard Developed
The main advantage of trading using opposite Vanguard International and Vanguard Developed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard International 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.The idea behind Vanguard International Dividend and Vanguard Developed 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 Developed vs. Vanguard Emerging Markets | Vanguard Developed vs. Vanguard Tax Managed Small Cap | Vanguard Developed vs. Vanguard Small Cap Index | Vanguard Developed vs. Vanguard Value Index |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
Other Complementary Tools
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. | |
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
| Bonds Directory Find actively traded corporate debentures issued by US companies | |
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets |