Correlation Between Vanguard FTSE and Xtrackers
Can any of the company-specific risk be diversified away by investing in both Vanguard FTSE 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 FTSE and Xtrackers 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 Xtrackers SP 500, you can compare the effects of market volatilities on Vanguard FTSE 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 FTSE with a short position of Xtrackers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard FTSE and Xtrackers.
Diversification Opportunities for Vanguard FTSE and Xtrackers
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Vanguard and Xtrackers is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard FTSE Developed 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 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 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 FTSE i.e., Vanguard FTSE and Xtrackers go up and down completely randomly.
Pair Corralation between Vanguard FTSE and Xtrackers
Assuming the 90 days trading horizon Vanguard FTSE Developed is expected to under-perform the Xtrackers. But the etf apears to be less risky and, when comparing its historical volatility, Vanguard FTSE Developed is 1.79 times less risky than Xtrackers. The etf trades about -0.14 of its potential returns per unit of risk. The Xtrackers SP 500 is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 21,843 in Xtrackers SP 500 on August 31, 2024 and sell it today you would earn a total of 2,618 from holding Xtrackers SP 500 or generate 11.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard FTSE Developed vs. Xtrackers SP 500
Performance |
| Timeline |
| Vanguard FTSE Developed |
| Xtrackers SP 500 |
Vanguard FTSE and Xtrackers Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard FTSE and Xtrackers
The main advantage of trading using opposite Vanguard FTSE and Xtrackers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard FTSE 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 FTSE vs. Vanguard USD Corporate | Vanguard FTSE vs. Vanguard Global Aggregate | Vanguard FTSE vs. Vanguard USD Corporate | Vanguard FTSE vs. Vanguard FTSE All World |
| Xtrackers vs. Xtrackers MSCI | Xtrackers vs. Xtrackers FTSE 250 | Xtrackers vs. Xtrackers Ie Plc | Xtrackers vs. Xtrackers Russell 2000 |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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