Correlation Between Vanguard FTSE and VanEck Global

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

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

Diversification Opportunities for Vanguard FTSE and VanEck Global

-0.24

Correlation Coefficient

Vanguard FTSE  VanEck Global

Very good diversification

The 3 months correlation between Vanguard and VanEck is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard FTSE Europe and VanEck Global Listed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Global Listed and Vanguard 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 Vanguard FTSE Europe are associated (or correlated) with VanEck Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Global Listed has no effect on the direction of Vanguard FTSE i.e., Vanguard FTSE and VanEck Global go up and down completely randomly.

Pair Corralation between Vanguard FTSE and VanEck Global

Assuming the 90 days trading horizon Vanguard FTSE is expected to generate 70.38 times less return on investment than VanEck Global. But when comparing it to its historical volatility, Vanguard FTSE Europe is 1.33 times less risky than VanEck Global. It trades about 0.01 of its potential returns per unit of risk. VanEck Global Listed is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  2,202  in VanEck Global Listed on September 15, 2024 and sell it today you would earn a total of  399.00  from holding VanEck Global Listed or generate 18.12% return on investment over 90 days.

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

Vanguard FTSE Europe  vs.  VanEck Global Listed

Vanguard FTSE Europe

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard FTSE Europe has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Vanguard FTSE is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

VanEck Global Listed

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Global Listed are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, VanEck Global unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vanguard FTSE and VanEck Global

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

The idea behind Vanguard FTSE Europe and VanEck Global Listed 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.