Correlation Between Vanguard Total and China Emerging
Can any of the company-specific risk be diversified away by investing in both Vanguard Total and China Emerging 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 Total and China Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Total International and China Emerging Leaders, you can compare the effects of market volatilities on Vanguard Total and China Emerging 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 Total with a short position of China Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Total and China Emerging.
Diversification Opportunities for Vanguard Total and China Emerging
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vanguard and China is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total International and China Emerging Leaders in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Emerging Leaders and Vanguard Total 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 Total International are associated (or correlated) with China Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Emerging Leaders has no effect on the direction of Vanguard Total i.e., Vanguard Total and China Emerging go up and down completely randomly.
Pair Corralation between Vanguard Total and China Emerging
Assuming the 90 days horizon Vanguard Total International is expected to under-perform the China Emerging. In addition to that, Vanguard Total is 2.26 times more volatile than China Emerging Leaders. It trades about -0.15 of its total potential returns per unit of risk. China Emerging Leaders is currently generating about -0.13 per unit of volatility. If you would invest 1,195 in China Emerging Leaders on September 25, 2024 and sell it today you would lose (34.00) from holding China Emerging Leaders or give up 2.85% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 98.44% |
Values | Daily Returns |
Vanguard Total International vs. China Emerging Leaders
Performance |
Timeline |
Vanguard Total Inter |
China Emerging Leaders |
Vanguard Total and China Emerging Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Vanguard Total and China Emerging
The main advantage of trading using opposite Vanguard Total and China Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Total position performs unexpectedly, China Emerging 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 China Emerging will offset losses from the drop in China Emerging's long position.Vanguard Total vs. Vanguard Materials Index | Vanguard Total vs. Vanguard Limited Term Tax Exempt | Vanguard Total vs. Vanguard Limited Term Tax Exempt | Vanguard Total vs. Vanguard Global Minimum |
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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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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