Correlation Between Vanguard Index and Wisdomtree International
Can any of the company-specific risk be diversified away by investing in both Vanguard Index and Wisdomtree 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 Index and Wisdomtree International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Index Funds and Wisdomtree International Equity, you can compare the effects of market volatilities on Vanguard Index and Wisdomtree 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 Index with a short position of Wisdomtree International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Index and Wisdomtree International.
Diversification Opportunities for Vanguard Index and Wisdomtree International
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vanguard and Wisdomtree is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Index Funds and Wisdomtree International Equit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wisdomtree International and Vanguard Index 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 Index Funds are associated (or correlated) with Wisdomtree International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wisdomtree International has no effect on the direction of Vanguard Index i.e., Vanguard Index and Wisdomtree International go up and down completely randomly.
Pair Corralation between Vanguard Index and Wisdomtree International
Assuming the 90 days trading horizon Vanguard Index Funds is expected to generate 4.64 times more return on investment than Wisdomtree International. However, Vanguard Index is 4.64 times more volatile than Wisdomtree International Equity. It trades about 0.11 of its potential returns per unit of risk. Wisdomtree International Equity is currently generating about 0.1 per unit of risk. If you would invest 360,587 in Vanguard Index Funds on September 14, 2024 and sell it today you would earn a total of 245,578 from holding Vanguard Index Funds or generate 68.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Vanguard Index Funds vs. Wisdomtree International Equit
Performance |
| Timeline |
| Vanguard Index Funds |
| Wisdomtree International |
Vanguard Index and Wisdomtree International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Index and Wisdomtree International
The main advantage of trading using opposite Vanguard Index and Wisdomtree International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Index position performs unexpectedly, Wisdomtree 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 Wisdomtree International will offset losses from the drop in Wisdomtree International's long position.| Vanguard Index vs. Vanguard Index Funds | Vanguard Index vs. Vanguard STAR Funds | Vanguard Index vs. SPDR SP 500 | Vanguard Index vs. iShares Trust |
| Wisdomtree International vs. Vanguard Index Funds | Wisdomtree International vs. Vanguard Index Funds | Wisdomtree International vs. Vanguard STAR Funds | Wisdomtree International vs. SPDR SP 500 |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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