Correlation Between Global X and Vanguard Consumer

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

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

Diversification Opportunities for Global X and Vanguard Consumer

-0.14

Correlation Coefficient

Global X  Vanguard Consumer

Good diversification

The 3 months correlation between Global and Vanguard is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Global X Aging and Vanguard Consumer Staples in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Consumer Staples and Global X 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 Global X Aging are associated (or correlated) with Vanguard Consumer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Consumer Staples has no effect on the direction of Global X i.e., Global X and Vanguard Consumer go up and down completely randomly.

Pair Corralation between Global X and Vanguard Consumer

Given the investment horizon of 90 days Global X Aging is expected to under-perform the Vanguard Consumer. In addition to that, Global X is 1.37 times more volatile than Vanguard Consumer Staples. It trades about -0.19 of its total potential returns per unit of risk. Vanguard Consumer Staples is currently generating about 0.24 per unit of volatility. If you would invest  21,539  in Vanguard Consumer Staples on September 12, 2024 and sell it today you would earn a total of  597.00  from holding Vanguard Consumer Staples or generate 2.77% return on investment over 90 days.

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

Global X Aging  vs.  Vanguard Consumer Staples

Global X Aging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global X Aging has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Global X is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Vanguard Consumer Staples

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Consumer Staples are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Vanguard Consumer is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Global X and Vanguard Consumer

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

The idea behind Global X Aging and Vanguard Consumer Staples 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.