Correlation Between Vanguard Developed and Vanguard Total
Can any of the company-specific risk be diversified away by investing in both Vanguard Developed and Vanguard Total 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 Developed and Vanguard Total into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Developed Markets and Vanguard Total Bond, you can compare the effects of market volatilities on Vanguard Developed and Vanguard Total 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 Developed with a short position of Vanguard Total. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Developed and Vanguard Total.
Diversification Opportunities for Vanguard Developed and Vanguard Total
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vanguard and Vanguard is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Developed Markets and Vanguard Total Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Total Bond and Vanguard Developed 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 Developed Markets are associated (or correlated) with Vanguard Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Total Bond has no effect on the direction of Vanguard Developed i.e., Vanguard Developed and Vanguard Total go up and down completely randomly.
Pair Corralation between Vanguard Developed and Vanguard Total
Assuming the 90 days horizon Vanguard Developed Markets is expected to generate 1.36 times more return on investment than Vanguard Total. However, Vanguard Developed is 1.36 times more volatile than Vanguard Total Bond. It trades about 0.06 of its potential returns per unit of risk. Vanguard Total Bond is currently generating about 0.03 per unit of risk. If you would invest 1,288 in Vanguard Developed Markets on September 14, 2024 and sell it today you would earn a total of 337.00 from holding Vanguard Developed Markets or generate 26.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Developed Markets vs. Vanguard Total Bond
Performance |
| Timeline |
| Vanguard Developed |
| Vanguard Total Bond |
Vanguard Developed and Vanguard Total Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Developed and Vanguard Total
The main advantage of trading using opposite Vanguard Developed and Vanguard Total positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Developed position performs unexpectedly, Vanguard Total 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 Total will offset losses from the drop in Vanguard Total's long position.| Vanguard Developed vs. Vanguard Emerging Markets | Vanguard Developed vs. Vanguard Tax Managed Small Cap | Vanguard Developed vs. Vanguard Small Cap Index | Vanguard Developed vs. Vanguard Value Index |
| Vanguard Total vs. Vanguard Materials Index | Vanguard Total vs. Vanguard Limited Term Tax Exempt | Vanguard Total vs. Vanguard Limited Term Tax Exempt | Vanguard Total 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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