Correlation Between Vanguard FTSE and Xtrackers Emerging
Can any of the company-specific risk be diversified away by investing in both Vanguard FTSE and Xtrackers Emerging 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 Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard FTSE Emerging and Xtrackers Emerging Markets, you can compare the effects of market volatilities on Vanguard FTSE and Xtrackers Emerging 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 Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard FTSE and Xtrackers Emerging.
Diversification Opportunities for Vanguard FTSE and Xtrackers Emerging
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 FTSE Emerging and Xtrackers Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers Emerging 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 Emerging are associated (or correlated) with Xtrackers Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers Emerging has no effect on the direction of Vanguard FTSE i.e., Vanguard FTSE and Xtrackers Emerging go up and down completely randomly.
Pair Corralation between Vanguard FTSE and Xtrackers Emerging
Considering the 90-day investment horizon Vanguard FTSE is expected to generate 1.0 times less return on investment than Xtrackers Emerging. But when comparing it to its historical volatility, Vanguard FTSE Emerging is 1.11 times less risky than Xtrackers Emerging. It trades about 0.05 of its potential returns per unit of risk. Xtrackers Emerging Markets is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 2,722 in Xtrackers Emerging Markets on August 26, 2024 and sell it today you would earn a total of 357.00 from holding Xtrackers Emerging Markets or generate 13.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard FTSE Emerging vs. Xtrackers Emerging Markets
Performance |
| Timeline |
| Vanguard FTSE Emerging |
| Xtrackers Emerging |
Vanguard FTSE and Xtrackers Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard FTSE and Xtrackers Emerging
The main advantage of trading using opposite Vanguard FTSE and Xtrackers Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard FTSE position performs unexpectedly, Xtrackers Emerging 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 Emerging will offset losses from the drop in Xtrackers Emerging's long position.| Vanguard FTSE vs. Vanguard FTSE Developed | Vanguard FTSE vs. Vanguard Real Estate | Vanguard FTSE vs. Vanguard Small Cap Index | Vanguard FTSE vs. Vanguard Total Stock |
| Xtrackers Emerging vs. Xtrackers MSCI Emerging | Xtrackers Emerging vs. FlexShares Morningstar Emerging | Xtrackers Emerging vs. Invesco SP Emerging | Xtrackers Emerging vs. First Trust Emerging |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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