Correlation Between Xtrackers FTSE and Vanguard FTSE
Can any of the company-specific risk be diversified away by investing in both Xtrackers FTSE and Vanguard 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 Xtrackers FTSE and Vanguard FTSE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Xtrackers FTSE 250 and Vanguard FTSE Developed, you can compare the effects of market volatilities on Xtrackers FTSE and Vanguard 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 Xtrackers FTSE with a short position of Vanguard FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtrackers FTSE and Vanguard FTSE.
Diversification Opportunities for Xtrackers FTSE and Vanguard FTSE
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Xtrackers and Vanguard is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers FTSE 250 and Vanguard FTSE Developed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard FTSE Developed and Xtrackers 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 Xtrackers FTSE 250 are associated (or correlated) with Vanguard FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard FTSE Developed has no effect on the direction of Xtrackers FTSE i.e., Xtrackers FTSE and Vanguard FTSE go up and down completely randomly.
Pair Corralation between Xtrackers FTSE and Vanguard FTSE
Assuming the 90 days trading horizon Xtrackers FTSE 250 is expected to generate 0.73 times more return on investment than Vanguard FTSE. However, Xtrackers FTSE 250 is 1.38 times less risky than Vanguard FTSE. It trades about 0.14 of its potential returns per unit of risk. Vanguard FTSE Developed is currently generating about -0.11 per unit of risk. If you would invest 192,200 in Xtrackers FTSE 250 on September 4, 2024 and sell it today you would earn a total of 4,160 from holding Xtrackers FTSE 250 or generate 2.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Xtrackers FTSE 250 vs. Vanguard FTSE Developed
Performance |
| Timeline |
| Xtrackers FTSE 250 |
| Vanguard FTSE Developed |
Xtrackers FTSE and Vanguard FTSE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Xtrackers FTSE and Vanguard FTSE
The main advantage of trading using opposite Xtrackers FTSE and Vanguard FTSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xtrackers FTSE position performs unexpectedly, Vanguard 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 Vanguard FTSE will offset losses from the drop in Vanguard FTSE's long position.| Xtrackers FTSE vs. Vanguard FTSE Developed | Xtrackers FTSE vs. Leverage Shares 2x | Xtrackers FTSE vs. Amundi Index Solutions | Xtrackers FTSE vs. Amundi Index Solutions |
| Vanguard FTSE vs. iShares Treasury Bond | Vanguard FTSE vs. iShares Treasury Bond | Vanguard FTSE vs. Amundi Treasury Bond | Vanguard FTSE vs. SPDR Barclays 10 |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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