Correlation Between Vanguard Tax-managed and Vanguard Global

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

Diversification Opportunities for Vanguard Tax-managed and Vanguard Global

0.75

Correlation Coefficient

Vanguard Tax-managed  Vanguard Global

Poor diversification

The 3 months correlation between Vanguard and Vanguard is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Tax Managed Capital 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 Tax-managed 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 Tax Managed Capital 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 Tax-managed i.e., Vanguard Tax-managed and Vanguard Global go up and down completely randomly.

Pair Corralation between Vanguard Tax-managed and Vanguard Global

Assuming the 90 days horizon Vanguard Tax Managed Capital is expected to generate 1.56 times more return on investment than Vanguard Global. However, Vanguard Tax-managed is 1.56 times more volatile than Vanguard Global Minimum. It trades about 0.21 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  28,356  in Vanguard Tax Managed Capital on September 1, 2024 and sell it today you would earn a total of  2,861  from holding Vanguard Tax Managed Capital or generate 10.09% return on investment over 90 days.

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

Vanguard Tax Managed Capital  vs.  Vanguard Global Minimum

Vanguard Tax Managed

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Tax Managed Capital are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak essential indicators, Vanguard Tax-managed may actually be approaching a critical reversion point that can send shares even higher in December 2024.

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 basic 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 Tax-managed and Vanguard Global

The main advantage of trading using opposite Vanguard Tax-managed and Vanguard Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Tax-managed 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 Tax Managed Capital 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.