Correlation Between Vanguard Materials and Vanguard Emerging
Can any of the company-specific risk be diversified away by investing in both Vanguard Materials 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 Materials 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 Materials Index and Vanguard Emerging Markets, you can compare the effects of market volatilities on Vanguard Materials 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 Materials with a short position of Vanguard Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Materials and Vanguard Emerging.
Diversification Opportunities for Vanguard Materials and Vanguard Emerging
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Vanguard and Vanguard is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Materials Index 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 Materials 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 Materials Index 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 Materials i.e., Vanguard Materials and Vanguard Emerging go up and down completely randomly.
Pair Corralation between Vanguard Materials and Vanguard Emerging
Assuming the 90 days horizon Vanguard Materials Index is expected to generate 1.25 times more return on investment than Vanguard Emerging. However, Vanguard Materials is 1.25 times more volatile than Vanguard Emerging Markets. It trades about 0.04 of its potential returns per unit of risk. Vanguard Emerging Markets is currently generating about 0.04 per unit of risk. If you would invest 9,074 in Vanguard Materials Index on August 27, 2024 and sell it today you would earn a total of 1,667 from holding Vanguard Materials Index or generate 18.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Materials Index vs. Vanguard Emerging Markets
Performance |
| Timeline |
| Vanguard Materials Index |
| Vanguard Emerging Markets |
Vanguard Materials and Vanguard Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Materials and Vanguard Emerging
The main advantage of trading using opposite Vanguard Materials and Vanguard Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Materials 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 Materials vs. Vanguard Emerging Markets | Vanguard Materials vs. Vanguard Total International | Vanguard Materials vs. Vanguard Reit Index | Vanguard Materials vs. Vanguard Industrials Index |
| Vanguard Emerging vs. Blackrock High Yield | Vanguard Emerging vs. Jpmorgan High Yield | Vanguard Emerging vs. Gmo High Yield | Vanguard Emerging vs. Pace High Yield |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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