Correlation Between Vanguard Total and Vanguard Global
Can any of the company-specific risk be diversified away by investing in both Vanguard Total 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 Total 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 Total Market and Vanguard Global Aggregate, you can compare the effects of market volatilities on Vanguard Total 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 Total with a short position of Vanguard Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Total and Vanguard Global.
Diversification Opportunities for Vanguard Total and Vanguard Global
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Vanguard and Vanguard is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Market and Vanguard Global Aggregate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Global Aggregate 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 Market 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 Aggregate has no effect on the direction of Vanguard Total i.e., Vanguard Total and Vanguard Global go up and down completely randomly.
Pair Corralation between Vanguard Total and Vanguard Global
Assuming the 90 days trading horizon Vanguard Total Market is expected to generate 3.07 times more return on investment than Vanguard Global. However, Vanguard Total is 3.07 times more volatile than Vanguard Global Aggregate. It trades about 0.3 of its potential returns per unit of risk. Vanguard Global Aggregate is currently generating about -0.06 per unit of risk. If you would invest 41,121 in Vanguard Total Market on September 14, 2024 and sell it today you would earn a total of 5,913 from holding Vanguard Total Market or generate 14.38% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Vanguard Total Market vs. Vanguard Global Aggregate
Performance |
Timeline |
Vanguard Total Market |
Vanguard Global Aggregate |
Vanguard Total and Vanguard Global Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Vanguard Total and Vanguard Global
The main advantage of trading using opposite Vanguard Total and Vanguard Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Total 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.Vanguard Total vs. Vanguard Global Minimum | Vanguard Total vs. Vanguard Global Aggregate | Vanguard Total vs. Vanguard Australian Fixed | Vanguard Total vs. Vanguard Global Infrastructure |
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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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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