Correlation Between Vanguard and Global X

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

By analyzing existing cross correlation between Vanguard SP 500 and Global X SP, you can compare the effects of market volatilities on Vanguard and Global X 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 with a short position of Global X. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard and Global X.

Diversification Opportunities for Vanguard and Global X

1.0

Correlation Coefficient

Vanguard  Global X

No risk reduction

The 3 months correlation between Vanguard and Global is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard SP 500 and Global X SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X SP and Vanguard 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 SP 500 are associated (or correlated) with Global X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global X SP has no effect on the direction of Vanguard i.e., Vanguard and Global X go up and down completely randomly.

Pair Corralation between Vanguard and Global X

Assuming the 90 days trading horizon Vanguard is expected to generate 1.0 times less return on investment than Global X. But when comparing it to its historical volatility, Vanguard SP 500 is 1.04 times less risky than Global X. It trades about 0.17 of its potential returns per unit of risk. Global X SP is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  3,080  in Global X SP on August 27, 2024 and sell it today you would earn a total of  100.00  from holding Global X SP or generate 3.25% return on investment over 90 days.

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

Vanguard SP 500  vs.  Global X SP

Vanguard SP 500

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard SP 500 are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Vanguard may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Global X SP

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Global X SP are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Global X may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Vanguard and Global X

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

The idea behind Vanguard SP 500 and Global X SP 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.