Correlation Between Vanguard Industrials and Global X

Can any of the company-specific risk be diversified away by investing in both Vanguard Industrials 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 Industrials 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 Industrials Index and Global X Blockchain, you can compare the effects of market volatilities on Vanguard Industrials 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 Industrials with a short position of Global X. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Industrials and Global X.

Diversification Opportunities for Vanguard Industrials and Global X

0.89

Correlation Coefficient

Vanguard Industrials  Global X

Very poor diversification

The 3 months correlation between Vanguard and Global is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Industrials Index and Global X Blockchain in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Blockchain and Vanguard Industrials 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 Industrials Index 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 Blockchain has no effect on the direction of Vanguard Industrials i.e., Vanguard Industrials and Global X go up and down completely randomly.

Pair Corralation between Vanguard Industrials and Global X

Considering the 90-day investment horizon Vanguard Industrials is expected to generate 5.62 times less return on investment than Global X. But when comparing it to its historical volatility, Vanguard Industrials Index is 5.56 times less risky than Global X. It trades about 0.16 of its potential returns per unit of risk. Global X Blockchain is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  4,277  in Global X Blockchain on September 12, 2024 and sell it today you would earn a total of  2,342  from holding Global X Blockchain or generate 54.76% return on investment over 90 days.

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

Vanguard Industrials Index  vs.  Global X Blockchain

Vanguard Industrials

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Industrials Index are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal forward indicators, Vanguard Industrials may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Global X Blockchain

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Blockchain are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent fundamental indicators, Global X demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vanguard Industrials and Global X

The main advantage of trading using opposite Vanguard Industrials and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Industrials 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 Industrials Index and Global X Blockchain 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.