Correlation Between Vanguard and Xtrackers Russell
Can any of the company-specific risk be diversified away by investing in both Vanguard and Xtrackers Russell 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 and Xtrackers Russell into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard SP 500 and Xtrackers Russell 2000, you can compare the effects of market volatilities on Vanguard and Xtrackers Russell 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 with a short position of Xtrackers Russell. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard and Xtrackers Russell.
Diversification Opportunities for Vanguard and Xtrackers Russell
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between Vanguard and Xtrackers is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard SP 500 and Xtrackers Russell 2000 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers Russell 2000 and Vanguard 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 SP 500 are associated (or correlated) with Xtrackers Russell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers Russell 2000 has no effect on the direction of Vanguard i.e., Vanguard and Xtrackers Russell go up and down completely randomly.
Pair Corralation between Vanguard and Xtrackers Russell
Assuming the 90 days trading horizon Vanguard is expected to generate 7.46 times less return on investment than Xtrackers Russell. But when comparing it to its historical volatility, Vanguard SP 500 is 4.47 times less risky than Xtrackers Russell. It trades about 0.13 of its potential returns per unit of risk. Xtrackers Russell 2000 is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 27,165 in Xtrackers Russell 2000 on September 13, 2024 and sell it today you would earn a total of 3,785 from holding Xtrackers Russell 2000 or generate 13.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Vanguard SP 500 vs. Xtrackers Russell 2000
Performance |
| Timeline |
| Vanguard SP 500 |
| Xtrackers Russell 2000 |
Vanguard and Xtrackers Russell Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard and Xtrackers Russell
The main advantage of trading using opposite Vanguard and Xtrackers Russell positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard position performs unexpectedly, Xtrackers Russell 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 Xtrackers Russell will offset losses from the drop in Xtrackers Russell's long position.| Vanguard vs. Baloise Holding AG | Vanguard vs. 21Shares Polkadot ETP | Vanguard vs. UBS ETF MSCI | Vanguard vs. BB Biotech AG |
| Xtrackers Russell vs. Xtrackers MSCI USA | Xtrackers Russell vs. Xtrackers USD Corporate | Xtrackers Russell vs. Xtrackers MSCI AC | Xtrackers Russell vs. Xtrackers MSCI World |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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