Correlation Between Vanguard Large and Xtrackers
Can any of the company-specific risk be diversified away by investing in both Vanguard Large and Xtrackers 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 Large and Xtrackers into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Large Cap Index and Xtrackers SP 500, you can compare the effects of market volatilities on Vanguard Large and Xtrackers 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 Large with a short position of Xtrackers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Large and Xtrackers.
Diversification Opportunities for Vanguard Large and Xtrackers
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Vanguard and Xtrackers is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Large Cap Index and Xtrackers SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers SP 500 and Vanguard Large 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 Large Cap Index are associated (or correlated) with Xtrackers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers SP 500 has no effect on the direction of Vanguard Large i.e., Vanguard Large and Xtrackers go up and down completely randomly.
Pair Corralation between Vanguard Large and Xtrackers
Allowing for the 90-day total investment horizon Vanguard Large Cap Index is expected to generate 1.03 times more return on investment than Xtrackers. However, Vanguard Large is 1.03 times more volatile than Xtrackers SP 500. It trades about 0.17 of its potential returns per unit of risk. Xtrackers SP 500 is currently generating about 0.14 per unit of risk. If you would invest 26,706 in Vanguard Large Cap Index on August 30, 2024 and sell it today you would earn a total of 855.00 from holding Vanguard Large Cap Index or generate 3.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
Vanguard Large Cap Index vs. Xtrackers SP 500
Performance |
| Timeline |
| Vanguard Large Cap |
| Xtrackers SP 500 |
Vanguard Large and Xtrackers Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Large and Xtrackers
The main advantage of trading using opposite Vanguard Large and Xtrackers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Large position performs unexpectedly, Xtrackers 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 will offset losses from the drop in Xtrackers' long position.| Vanguard Large vs. Vanguard Mid Cap Index | Vanguard Large vs. Vanguard Small Cap Index | Vanguard Large vs. Vanguard Extended Market | Vanguard Large vs. Vanguard Small Cap Growth |
| Xtrackers vs. Xtrackers MSCI USA | Xtrackers vs. iShares ESG MSCI | Xtrackers vs. SPDR SP 500 | Xtrackers vs. iShares MSCI USA |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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