Correlation Between Vanguard International and Vanguard Global
Can any of the company-specific risk be diversified away by investing in both Vanguard International and Vanguard Global 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 International and Vanguard Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard International Value and Vanguard Global Equity, you can compare the effects of market volatilities on Vanguard International and Vanguard Global 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 International with a short position of Vanguard Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard International and Vanguard Global.
Diversification Opportunities for Vanguard International and Vanguard Global
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Vanguard and Vanguard is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard International Value and Vanguard Global Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Global Equity and Vanguard International 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 International Value are associated (or correlated) with Vanguard Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Global Equity has no effect on the direction of Vanguard International i.e., Vanguard International and Vanguard Global go up and down completely randomly.
Pair Corralation between Vanguard International and Vanguard Global
Assuming the 90 days horizon Vanguard International is expected to generate 1.1 times less return on investment than Vanguard Global. But when comparing it to its historical volatility, Vanguard International Value is 1.2 times less risky than Vanguard Global. It trades about 0.27 of its potential returns per unit of risk. Vanguard Global Equity is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 3,559 in Vanguard Global Equity on November 3, 2024 and sell it today you would earn a total of 169.00 from holding Vanguard Global Equity or generate 4.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard International Value vs. Vanguard Global Equity
Performance |
| Timeline |
| Vanguard International |
| Vanguard Global Equity |
Vanguard International and Vanguard Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard International and Vanguard Global
The main advantage of trading using opposite Vanguard International and Vanguard Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard International position performs unexpectedly, Vanguard Global 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 Global will offset losses from the drop in Vanguard Global's long position.The idea behind Vanguard International Value and Vanguard Global Equity pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
| Vanguard Global vs. Vanguard Strategic Equity | Vanguard Global vs. Vanguard International Value | Vanguard Global vs. Vanguard Selected Value | Vanguard Global vs. Vanguard International Explorer |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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