Correlation Between Vanguard FTSE and Vanguard All

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

By analyzing existing cross correlation between Vanguard FTSE Global and Vanguard All Equity ETF, you can compare the effects of market volatilities on Vanguard FTSE and Vanguard All 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 Vanguard All. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard FTSE and Vanguard All.

Diversification Opportunities for Vanguard FTSE and Vanguard All

0.99

Correlation Coefficient

Vanguard FTSE  Vanguard All

No risk reduction

The 3 months correlation between Vanguard and Vanguard is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard FTSE Global and Vanguard All Equity ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard All Equity 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 Global are associated (or correlated) with Vanguard All. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard All Equity has no effect on the direction of Vanguard FTSE i.e., Vanguard FTSE and Vanguard All go up and down completely randomly.

Pair Corralation between Vanguard FTSE and Vanguard All

Assuming the 90 days trading horizon Vanguard FTSE Global is expected to generate 0.96 times more return on investment than Vanguard All. However, Vanguard FTSE Global is 1.04 times less risky than Vanguard All. It trades about 0.26 of its potential returns per unit of risk. Vanguard All Equity ETF is currently generating about 0.12 per unit of risk. If you would invest  5,752  in Vanguard FTSE Global on March 10, 2024 and sell it today you would earn a total of  125.00  from holding Vanguard FTSE Global or generate 2.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.45%
Values	Daily Returns

Vanguard FTSE Global  vs.  Vanguard All Equity ETF

Vanguard FTSE Global

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard FTSE Global are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Vanguard FTSE is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Vanguard All Equity

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard All Equity ETF are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Vanguard All is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Vanguard FTSE and Vanguard All

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

The idea behind Vanguard FTSE Global and Vanguard All Equity ETF 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.