Correlation Between Vanguard International and Xtrackers FTSE
Can any of the company-specific risk be diversified away by investing in both Vanguard International and Xtrackers FTSE 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 Xtrackers FTSE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard International High and Xtrackers FTSE Developed, you can compare the effects of market volatilities on Vanguard International and Xtrackers FTSE 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 Xtrackers FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard International and Xtrackers FTSE.
Diversification Opportunities for Vanguard International and Xtrackers FTSE
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Vanguard and Xtrackers is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard International High and Xtrackers FTSE Developed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers FTSE Developed 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 High are associated (or correlated) with Xtrackers FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers FTSE Developed has no effect on the direction of Vanguard International i.e., Vanguard International and Xtrackers FTSE go up and down completely randomly.
Pair Corralation between Vanguard International and Xtrackers FTSE
Given the investment horizon of 90 days Vanguard International High is expected to generate 1.09 times more return on investment than Xtrackers FTSE. However, Vanguard International is 1.09 times more volatile than Xtrackers FTSE Developed. It trades about 0.0 of its potential returns per unit of risk. Xtrackers FTSE Developed is currently generating about -0.06 per unit of risk. If you would invest 7,090 in Vanguard International High on September 12, 2024 and sell it today you would lose (10.00) from holding Vanguard International High or give up 0.14% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard International High vs. Xtrackers FTSE Developed
Performance |
| Timeline |
| Vanguard International |
| Xtrackers FTSE Developed |
Vanguard International and Xtrackers FTSE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard International and Xtrackers FTSE
The main advantage of trading using opposite Vanguard International and Xtrackers FTSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard International position performs unexpectedly, Xtrackers FTSE 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 FTSE will offset losses from the drop in Xtrackers FTSE's long position.The idea behind Vanguard International High and Xtrackers FTSE Developed 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.
| Xtrackers FTSE vs. Xtrackers Russell Multifactor | Xtrackers FTSE vs. Xtrackers MSCI All | Xtrackers FTSE vs. WisdomTree Dynamic Currency | Xtrackers FTSE vs. Xtrackers MSCI Eurozone |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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