Correlation Between Vanguard Global and Vanguard European
Can any of the company-specific risk be diversified away by investing in both Vanguard Global and Vanguard European 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 European into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Global Minimum and Vanguard European Stock, you can compare the effects of market volatilities on Vanguard Global and Vanguard European 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 European. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Global and Vanguard European.
Diversification Opportunities for Vanguard Global and Vanguard European
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between Vanguard and Vanguard is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Global Minimum and Vanguard European Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard European Stock 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 Minimum are associated (or correlated) with Vanguard European. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard European Stock has no effect on the direction of Vanguard Global i.e., Vanguard Global and Vanguard European go up and down completely randomly.
Pair Corralation between Vanguard Global and Vanguard European
Assuming the 90 days horizon Vanguard Global Minimum is expected to generate 0.66 times more return on investment than Vanguard European. However, Vanguard Global Minimum is 1.51 times less risky than Vanguard European. It trades about 0.15 of its potential returns per unit of risk. Vanguard European Stock is currently generating about -0.3 per unit of risk. If you would invest 3,259 in Vanguard Global Minimum on August 29, 2024 and sell it today you would earn a total of 62.00 from holding Vanguard Global Minimum or generate 1.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Global Minimum vs. Vanguard European Stock
Performance |
| Timeline |
| Vanguard Global Minimum |
| Vanguard European Stock |
Vanguard Global and Vanguard European Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Global and Vanguard European
The main advantage of trading using opposite Vanguard Global and Vanguard European positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Global position performs unexpectedly, Vanguard European 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 European will offset losses from the drop in Vanguard European's long position.| Vanguard Global vs. Vanguard Global Minimum | Vanguard Global vs. Vanguard Global Wellington | Vanguard Global vs. Vanguard Tax Managed Capital | Vanguard Global vs. Vanguard Tax Managed Balanced |
| Vanguard European vs. Vanguard Materials Index | Vanguard European vs. Vanguard Limited Term Tax Exempt | Vanguard European vs. Vanguard Limited Term Tax Exempt | Vanguard European vs. Vanguard Global Minimum |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
Other Complementary Tools
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| Global Correlations Find global opportunities by holding instruments from different markets | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Earnings Calls Check upcoming earnings announcements updated hourly across public exchanges | |
| Technical Analysis Check basic technical indicators and analysis based on most latest market data |