Correlation Between Vanguard FTSE and VinaCapital Vietnam

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

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

Diversification Opportunities for Vanguard FTSE and VinaCapital Vietnam

0.83

Correlation Coefficient

Vanguard FTSE  VinaCapital Vietnam

Very poor diversification

The 3 months correlation between Vanguard and VinaCapital is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard FTSE Developed and VinaCapital Vietnam Opportunit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VinaCapital Vietnam and Vanguard FTSE 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 FTSE Developed are associated (or correlated) with VinaCapital Vietnam. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VinaCapital Vietnam has no effect on the direction of Vanguard FTSE i.e., Vanguard FTSE and VinaCapital Vietnam go up and down completely randomly.

Pair Corralation between Vanguard FTSE and VinaCapital Vietnam

Assuming the 90 days trading horizon Vanguard FTSE Developed is expected to under-perform the VinaCapital Vietnam. But the etf apears to be less risky and, when comparing its historical volatility, Vanguard FTSE Developed is 1.05 times less risky than VinaCapital Vietnam. The etf trades about -0.16 of its potential returns per unit of risk. The VinaCapital Vietnam Opportunity is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  45,756  in VinaCapital Vietnam Opportunity on September 23, 2024 and sell it today you would lose (756.00) from holding VinaCapital Vietnam Opportunity or give up 1.65% of portfolio value over 90 days.

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

Vanguard FTSE Developed  vs.  VinaCapital Vietnam Opportunit

Vanguard FTSE Developed

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard FTSE Developed has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Etf's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private investors.

VinaCapital Vietnam

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VinaCapital Vietnam Opportunity has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, VinaCapital Vietnam is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Vanguard FTSE and VinaCapital Vietnam

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

The idea behind Vanguard FTSE Developed and VinaCapital Vietnam Opportunity 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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.