Correlation Between Vanguard FTSE and Vanguard International
Can any of the company-specific risk be diversified away by investing in both Vanguard FTSE and Vanguard International 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 FTSE and Vanguard International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard FTSE All World and Vanguard International High, you can compare the effects of market volatilities on Vanguard FTSE and Vanguard International 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 FTSE with a short position of Vanguard International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard FTSE and Vanguard International.
Diversification Opportunities for Vanguard FTSE and Vanguard International
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vanguard and Vanguard is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard FTSE All World and Vanguard International High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard International and Vanguard FTSE 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 FTSE All World are associated (or correlated) with Vanguard International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard International has no effect on the direction of Vanguard FTSE i.e., Vanguard FTSE and Vanguard International go up and down completely randomly.
Pair Corralation between Vanguard FTSE and Vanguard International
Considering the 90-day investment horizon Vanguard FTSE All World is expected to generate 0.97 times more return on investment than Vanguard International. However, Vanguard FTSE All World is 1.03 times less risky than Vanguard International. It trades about -0.11 of its potential returns per unit of risk. Vanguard International High is currently generating about -0.13 per unit of risk. If you would invest 12,143 in Vanguard FTSE All World on August 28, 2024 and sell it today you would lose (240.00) from holding Vanguard FTSE All World or give up 1.98% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard FTSE All World vs. Vanguard International High
Performance |
| Timeline |
| Vanguard FTSE All |
| Vanguard International |
Vanguard FTSE and Vanguard International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard FTSE and Vanguard International
The main advantage of trading using opposite Vanguard FTSE and Vanguard International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard FTSE position performs unexpectedly, Vanguard International 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 International will offset losses from the drop in Vanguard International's long position.| Vanguard FTSE vs. iShares MSCI USA | Vanguard FTSE vs. iShares Edge MSCI | Vanguard FTSE vs. iShares MSCI Intl | Vanguard FTSE vs. iShares MSCI Emerging |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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