Correlation Between Vanguard FTSE and VanEck New
Can any of the company-specific risk be diversified away by investing in both Vanguard FTSE and VanEck New 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 FTSE and VanEck New into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard FTSE Developed and VanEck New China, you can compare the effects of market volatilities on Vanguard FTSE and VanEck New 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 FTSE with a short position of VanEck New. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard FTSE and VanEck New.
Diversification Opportunities for Vanguard FTSE and VanEck New
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Vanguard and VanEck is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard FTSE Developed and VanEck New China in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck New China and Vanguard FTSE 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 FTSE Developed are associated (or correlated) with VanEck New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck New China has no effect on the direction of Vanguard FTSE i.e., Vanguard FTSE and VanEck New go up and down completely randomly.
Pair Corralation between Vanguard FTSE and VanEck New
Assuming the 90 days trading horizon Vanguard FTSE Developed is expected to generate 0.52 times more return on investment than VanEck New. However, Vanguard FTSE Developed is 1.91 times less risky than VanEck New. It trades about 0.06 of its potential returns per unit of risk. VanEck New China is currently generating about -0.01 per unit of risk. If you would invest 4,020 in Vanguard FTSE Developed on November 29, 2024 and sell it today you would earn a total of 1,196 from holding Vanguard FTSE Developed or generate 29.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.8% |
| Values | Daily Returns |
Vanguard FTSE Developed vs. VanEck New China
Performance |
| Timeline |
| Vanguard FTSE Developed |
| VanEck New China |
Vanguard FTSE and VanEck New Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard FTSE and VanEck New
The main advantage of trading using opposite Vanguard FTSE and VanEck New positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard FTSE position performs unexpectedly, VanEck New 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 VanEck New will offset losses from the drop in VanEck New's long position.| Vanguard FTSE vs. Vanguard USD Corporate | Vanguard FTSE vs. Vanguard Global Aggregate | Vanguard FTSE vs. Vanguard USD Corporate | Vanguard FTSE vs. Vanguard FTSE All World |
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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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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