Correlation Between Vanguard Global and Vanguard Extended
Can any of the company-specific risk be diversified away by investing in both Vanguard Global and Vanguard Extended 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 Global and Vanguard Extended into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Global Minimum and Vanguard Extended Market, you can compare the effects of market volatilities on Vanguard Global and Vanguard Extended 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 Global with a short position of Vanguard Extended. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Global and Vanguard Extended.
Diversification Opportunities for Vanguard Global and Vanguard Extended
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Vanguard and Vanguard is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Global Minimum and Vanguard Extended Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Extended Market and Vanguard Global 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 Global Minimum are associated (or correlated) with Vanguard Extended. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Extended Market has no effect on the direction of Vanguard Global i.e., Vanguard Global and Vanguard Extended go up and down completely randomly.
Pair Corralation between Vanguard Global and Vanguard Extended
Assuming the 90 days horizon Vanguard Global Minimum is expected to generate 0.55 times more return on investment than Vanguard Extended. However, Vanguard Global Minimum is 1.82 times less risky than Vanguard Extended. It trades about 0.05 of its potential returns per unit of risk. Vanguard Extended Market is currently generating about -0.15 per unit of risk. If you would invest 3,033 in Vanguard Global Minimum on March 10, 2024 and sell it today you would earn a total of 12.00 from holding Vanguard Global Minimum or generate 0.4% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Vanguard Global Minimum vs. Vanguard Extended Market
Performance |
Timeline |
Vanguard Global Minimum |
Vanguard Extended Market |
Vanguard Global and Vanguard Extended Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Vanguard Global and Vanguard Extended
The main advantage of trading using opposite Vanguard Global and Vanguard Extended positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Global position performs unexpectedly, Vanguard Extended 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 Extended will offset losses from the drop in Vanguard Extended's long position.Vanguard Global vs. Vanguard Global Minimum | Vanguard Global vs. Vanguard Global Wellington | Vanguard Global vs. Vanguard Tax Managed Capital | Vanguard Global vs. Vanguard Tax Managed Balanced |
Vanguard Extended vs. Vanguard Materials Index | Vanguard Extended vs. Vanguard Limited Term Tax Exempt | Vanguard Extended vs. Vanguard Limited Term Tax Exempt | Vanguard Extended vs. Vanguard Global Minimum |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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