Correlation Between Vanguard and Global X
Can any of the company-specific risk be diversified away by investing in both Vanguard and Global X 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 and Global X into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard SP 500 and Global X NASDAQ 100, you can compare the effects of market volatilities on Vanguard and Global X 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 with a short position of Global X. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard and Global X.
Diversification Opportunities for Vanguard and Global X
Poor diversification
The 3 months correlation between Vanguard and Global is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard SP 500 and Global X NASDAQ 100 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X NASDAQ and Vanguard 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 SP 500 are associated (or correlated) with Global X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global X NASDAQ has no effect on the direction of Vanguard i.e., Vanguard and Global X go up and down completely randomly.
Pair Corralation between Vanguard and Global X
Assuming the 90 days trading horizon Vanguard SP 500 is expected to generate 0.71 times more return on investment than Global X. However, Vanguard SP 500 is 1.41 times less risky than Global X. It trades about 0.15 of its potential returns per unit of risk. Global X NASDAQ 100 is currently generating about 0.07 per unit of risk. If you would invest 9,453 in Vanguard SP 500 on August 30, 2024 and sell it today you would earn a total of 267.00 from holding Vanguard SP 500 or generate 2.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Vanguard SP 500 vs. Global X NASDAQ 100
Performance |
| Timeline |
| Vanguard SP 500 |
| Global X NASDAQ |
Vanguard and Global X Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard and Global X
The main advantage of trading using opposite Vanguard and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard position performs unexpectedly, Global X 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 Global X will offset losses from the drop in Global X's long position.| Vanguard vs. Vanguard SP 500 | Vanguard vs. Vanguard FTSE Canadian | Vanguard vs. iShares NASDAQ 100 | Vanguard vs. Vanguard FTSE Canada |
| Global X vs. BMO Low Volatility | Global X vs. BMO MSCI USA | Global X vs. BMO Equal Weight | Global X vs. BMO Dividend ETF |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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