Correlation Between Vanguard International and IQ 500
Can any of the company-specific risk be diversified away by investing in both Vanguard International and IQ 500 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 IQ 500 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 IQ 500 International, you can compare the effects of market volatilities on Vanguard International and IQ 500 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 IQ 500. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard International and IQ 500.
Diversification Opportunities for Vanguard International and IQ 500
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vanguard and IQIN is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard International High and IQ 500 International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IQ 500 International 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 IQ 500. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IQ 500 International has no effect on the direction of Vanguard International i.e., Vanguard International and IQ 500 go up and down completely randomly.
Pair Corralation between Vanguard International and IQ 500
Given the investment horizon of 90 days Vanguard International High is expected to generate 0.94 times more return on investment than IQ 500. However, Vanguard International High is 1.06 times less risky than IQ 500. It trades about -0.11 of its potential returns per unit of risk. IQ 500 International is currently generating about -0.19 per unit of risk. If you would invest 7,137 in Vanguard International High on August 30, 2024 and sell it today you would lose (145.00) from holding Vanguard International High or give up 2.03% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 81.82% |
| Values | Daily Returns |
Vanguard International High vs. IQ 500 International
Performance |
| Timeline |
| Vanguard International |
| IQ 500 International |
Vanguard International and IQ 500 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard International and IQ 500
The main advantage of trading using opposite Vanguard International and IQ 500 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard International position performs unexpectedly, IQ 500 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 IQ 500 will offset losses from the drop in IQ 500's long position.The idea behind Vanguard International High and IQ 500 International 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.
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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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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