Correlation Between Vanguard International and Vanguard Equity
Can any of the company-specific risk be diversified away by investing in both Vanguard International and Vanguard Equity 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 International and Vanguard Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard International Growth and Vanguard Equity Income, you can compare the effects of market volatilities on Vanguard International and Vanguard Equity 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 International with a short position of Vanguard Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard International and Vanguard Equity.
Diversification Opportunities for Vanguard International and Vanguard Equity
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Vanguard and Vanguard is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard International Growth and Vanguard Equity Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Equity Income and Vanguard International 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 International Growth are associated (or correlated) with Vanguard Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Equity Income has no effect on the direction of Vanguard International i.e., Vanguard International and Vanguard Equity go up and down completely randomly.
Pair Corralation between Vanguard International and Vanguard Equity
Assuming the 90 days horizon Vanguard International is expected to generate 4.82 times less return on investment than Vanguard Equity. In addition to that, Vanguard International is 1.55 times more volatile than Vanguard Equity Income. It trades about 0.02 of its total potential returns per unit of risk. Vanguard Equity Income is currently generating about 0.13 per unit of volatility. If you would invest 4,210 in Vanguard Equity Income on August 25, 2024 and sell it today you would earn a total of 508.00 from holding Vanguard Equity Income or generate 12.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard International Growth vs. Vanguard Equity Income
Performance |
| Timeline |
| Vanguard International |
| Vanguard Equity Income |
Vanguard International and Vanguard Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard International and Vanguard Equity
The main advantage of trading using opposite Vanguard International and Vanguard Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard International position performs unexpectedly, Vanguard Equity 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 Vanguard Equity will offset losses from the drop in Vanguard Equity's long position.The idea behind Vanguard International Growth and Vanguard Equity Income pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
| Vanguard Equity vs. Vanguard Explorer Fund | Vanguard Equity vs. Vanguard International Growth | Vanguard Equity vs. Vanguard Primecap Fund | Vanguard Equity vs. Vanguard Wellington Fund |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
Other Complementary Tools
| Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules | |
| Portfolio Analyzer Portfolio analysis module that provides access to portfolio diagnostics and optimization engine | |
| Content Syndication Quickly integrate customizable finance content to your own investment portal | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| Fundamental Analysis View fundamental data based on most recent published financial statements |