Correlation Between Vanguard Consumer and Global X

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

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

Diversification Opportunities for Vanguard Consumer and Global X

0.54

Correlation Coefficient

Vanguard Consumer  Global X

Very weak diversification

The 3 months correlation between Vanguard and Global is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Consumer Discretionar and Global X Disruptive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Disruptive and Vanguard Consumer 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 Consumer Discretionary are associated (or correlated) with Global X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global X Disruptive has no effect on the direction of Vanguard Consumer i.e., Vanguard Consumer and Global X go up and down completely randomly.

Pair Corralation between Vanguard Consumer and Global X

Considering the 90-day investment horizon Vanguard Consumer is expected to generate 1.26 times less return on investment than Global X. But when comparing it to its historical volatility, Vanguard Consumer Discretionary is 2.29 times less risky than Global X. It trades about 0.26 of its potential returns per unit of risk. Global X Disruptive is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,304  in Global X Disruptive on September 5, 2024 and sell it today you would earn a total of  298.00  from holding Global X Disruptive or generate 22.85% return on investment over 90 days.

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

Vanguard Consumer Discretionar  vs.  Global X Disruptive

Vanguard Consumer

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Consumer Discretionary are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady fundamental indicators, Vanguard Consumer reported solid returns over the last few months and may actually be approaching a breakup point.

Global X Disruptive

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Disruptive are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Global X unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vanguard Consumer and Global X

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

The idea behind Vanguard Consumer Discretionary and Global X Disruptive 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 CEOs Directory module to screen CEOs from public companies around the world.