Correlation Between Vanguard International and Vanguard Index
Can any of the company-specific risk be diversified away by investing in both Vanguard International and Vanguard Index 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 Index into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard International Equity and Vanguard Index Funds, you can compare the effects of market volatilities on Vanguard International and Vanguard Index 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 Index. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard International and Vanguard Index.
Diversification Opportunities for Vanguard International and Vanguard Index
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vanguard and Vanguard is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard International Equity and Vanguard Index Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Index Funds 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 Equity are associated (or correlated) with Vanguard Index. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Index Funds has no effect on the direction of Vanguard International i.e., Vanguard International and Vanguard Index go up and down completely randomly.
Pair Corralation between Vanguard International and Vanguard Index
Assuming the 90 days trading horizon Vanguard International is expected to generate 1.78 times less return on investment than Vanguard Index. In addition to that, Vanguard International is 1.0 times more volatile than Vanguard Index Funds. It trades about 0.09 of its total potential returns per unit of risk. Vanguard Index Funds is currently generating about 0.15 per unit of volatility. If you would invest 654,222 in Vanguard Index Funds on August 26, 2024 and sell it today you would earn a total of 467,278 from holding Vanguard Index Funds or generate 71.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard International Equity vs. Vanguard Index Funds
Performance |
| Timeline |
| Vanguard International |
| Vanguard Index Funds |
Vanguard International and Vanguard Index Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard International and Vanguard Index
The main advantage of trading using opposite Vanguard International and Vanguard Index positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard International position performs unexpectedly, Vanguard Index 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 Index will offset losses from the drop in Vanguard Index's long position.| Vanguard International vs. iShares Core MSCI | Vanguard International vs. The Select Sector | Vanguard International vs. Promotora y Operadora | Vanguard International vs. iShares Global Timber |
| Vanguard Index vs. iShares Global Timber | Vanguard Index vs. Vanguard World | Vanguard Index vs. iShares Trust | Vanguard Index vs. iShares Trust |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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