Correlation Between Vanguard International and Vanguard Selected

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

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

Diversification Opportunities for Vanguard International and Vanguard Selected

-0.29

Correlation Coefficient

Vanguard International  Vanguard Selected

Very good diversification

The 3 months correlation between Vanguard and Vanguard is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard International Value and Vanguard Selected Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Selected Value and Vanguard International 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 International Value are associated (or correlated) with Vanguard Selected. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Selected Value has no effect on the direction of Vanguard International i.e., Vanguard International and Vanguard Selected go up and down completely randomly.

Pair Corralation between Vanguard International and Vanguard Selected

Assuming the 90 days horizon Vanguard International Value is expected to under-perform the Vanguard Selected. In addition to that, Vanguard International is 1.01 times more volatile than Vanguard Selected Value. It trades about -0.04 of its total potential returns per unit of risk. Vanguard Selected Value is currently generating about 0.14 per unit of volatility. If you would invest  3,107  in Vanguard Selected Value on September 4, 2024 and sell it today you would earn a total of  239.00  from holding Vanguard Selected Value or generate 7.69% return on investment over 90 days.

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

Vanguard International Value  vs.  Vanguard Selected Value

Vanguard International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard International Value has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Vanguard International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Vanguard Selected Value

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Selected Value are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Vanguard Selected may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Vanguard International and Vanguard Selected

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

The idea behind Vanguard International Value and Vanguard Selected Value 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.