Correlation Between Vanguard Commodity and Vanguard Global

Can any of the company-specific risk be diversified away by investing in both Vanguard Commodity and Vanguard Global 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 Commodity and Vanguard Global into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Vanguard Commodity Strategy and Vanguard Global Minimum, you can compare the effects of market volatilities on Vanguard Commodity and Vanguard Global 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 Commodity with a short position of Vanguard Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Commodity and Vanguard Global.

Diversification Opportunities for Vanguard Commodity and Vanguard Global

0.34

Correlation Coefficient

Vanguard Commodity  Vanguard Global

Weak diversification

The 3 months correlation between Vanguard and Vanguard is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Commodity Strategy and Vanguard Global Minimum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Global Minimum and Vanguard Commodity 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 Commodity Strategy are associated (or correlated) with Vanguard Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Global Minimum has no effect on the direction of Vanguard Commodity i.e., Vanguard Commodity and Vanguard Global go up and down completely randomly.

Pair Corralation between Vanguard Commodity and Vanguard Global

Assuming the 90 days horizon Vanguard Commodity Strategy is expected to generate 1.64 times more return on investment than Vanguard Global. However, Vanguard Commodity is 1.64 times more volatile than Vanguard Global Minimum. It trades about 0.08 of its potential returns per unit of risk. Vanguard Global Minimum is currently generating about 0.08 per unit of risk. If you would invest  2,495  in Vanguard Commodity Strategy on September 3, 2024 and sell it today you would earn a total of  96.00  from holding Vanguard Commodity Strategy or generate 3.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Vanguard Commodity Strategy  vs.  Vanguard Global Minimum

Vanguard Commodity

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Commodity Strategy are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Vanguard Commodity is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Vanguard Global Minimum

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Global Minimum are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Vanguard Global is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vanguard Commodity and Vanguard Global

The main advantage of trading using opposite Vanguard Commodity and Vanguard Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Commodity position performs unexpectedly, Vanguard Global 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 Global will offset losses from the drop in Vanguard Global's long position.

The idea behind Vanguard Commodity Strategy and Vanguard Global Minimum 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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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.