Correlation Between Vanguard Total and FlexShares STOXX
Can any of the company-specific risk be diversified away by investing in both Vanguard Total and FlexShares STOXX 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 FlexShares STOXX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Total Market and FlexShares STOXX Global, you can compare the effects of market volatilities on Vanguard Total and FlexShares STOXX 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 FlexShares STOXX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Total and FlexShares STOXX.
Diversification Opportunities for Vanguard Total and FlexShares STOXX
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vanguard and FlexShares is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Market and FlexShares STOXX Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FlexShares STOXX Global 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 Market are associated (or correlated) with FlexShares STOXX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FlexShares STOXX Global has no effect on the direction of Vanguard Total i.e., Vanguard Total and FlexShares STOXX go up and down completely randomly.
Pair Corralation between Vanguard Total and FlexShares STOXX
Assuming the 90 days trading horizon Vanguard Total Market is expected to generate 1.37 times more return on investment than FlexShares STOXX. However, Vanguard Total is 1.37 times more volatile than FlexShares STOXX Global. It trades about 0.37 of its potential returns per unit of risk. FlexShares STOXX Global is currently generating about 0.29 per unit of risk. If you would invest 9,989 in Vanguard Total Market on September 1, 2024 and sell it today you would earn a total of 651.00 from holding Vanguard Total Market or generate 6.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Total Market vs. FlexShares STOXX Global
Performance |
| Timeline |
| Vanguard Total Market |
| FlexShares STOXX Global |
Vanguard Total and FlexShares STOXX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Total and FlexShares STOXX
The main advantage of trading using opposite Vanguard Total and FlexShares STOXX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Total position performs unexpectedly, FlexShares STOXX 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 FlexShares STOXX will offset losses from the drop in FlexShares STOXX's long position.| Vanguard Total vs. Vanguard FTSE Developed | Vanguard Total vs. iShares Core Canadian | Vanguard Total vs. BMO Long Federal | Vanguard Total vs. Vanguard FTSE Canada |
| FlexShares STOXX vs. FlexShares Quality Large | FlexShares STOXX vs. FlexShares Disciplined Duration | FlexShares STOXX vs. FlexShares Real Assets | FlexShares STOXX vs. First Trust Developed |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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