Correlation Between Vanguard Total and International Equities
Can any of the company-specific risk be diversified away by investing in both Vanguard Total and International Equities 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 Total and International Equities into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Total International and International Equities Index, you can compare the effects of market volatilities on Vanguard Total and International Equities 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 Total with a short position of International Equities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Total and International Equities.
Diversification Opportunities for Vanguard Total and International Equities
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vanguard and International is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total International and International Equities Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Equities and Vanguard Total 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 Total International are associated (or correlated) with International Equities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Equities has no effect on the direction of Vanguard Total i.e., Vanguard Total and International Equities go up and down completely randomly.
Pair Corralation between Vanguard Total and International Equities
Assuming the 90 days horizon Vanguard Total is expected to generate 1.27 times less return on investment than International Equities. But when comparing it to its historical volatility, Vanguard Total International is 1.03 times less risky than International Equities. It trades about 0.31 of its potential returns per unit of risk. International Equities Index is currently generating about 0.39 of returns per unit of risk over similar time horizon. If you would invest 807.00 in International Equities Index on November 2, 2024 and sell it today you would earn a total of 48.00 from holding International Equities Index or generate 5.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.0% |
| Values | Daily Returns |
Vanguard Total International vs. International Equities Index
Performance |
| Timeline |
| Vanguard Total Inter |
| International Equities |
Vanguard Total and International Equities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Total and International Equities
The main advantage of trading using opposite Vanguard Total and International Equities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Total position performs unexpectedly, International Equities 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 International Equities will offset losses from the drop in International Equities' long position.| Vanguard Total vs. Vanguard Total Bond | Vanguard Total vs. Vanguard Extended Market | Vanguard Total vs. Vanguard Small Cap Index | Vanguard Total vs. Vanguard Mid Cap Index |
| International Equities vs. Mid Cap Index | International Equities vs. Valic Company I | International Equities vs. Mid Cap Strategic | International Equities vs. Valic Company I |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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