Correlation Between Vanguard Total and Vanguard ESG

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

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

Diversification Opportunities for Vanguard Total and Vanguard ESG

0.83

Correlation Coefficient

Vanguard Total  Vanguard ESG

Very poor diversification

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

Pair Corralation between Vanguard Total and Vanguard ESG

Given the investment horizon of 90 days Vanguard Total World is expected to generate 0.68 times more return on investment than Vanguard ESG. However, Vanguard Total World is 1.48 times less risky than Vanguard ESG. It trades about -0.35 of its potential returns per unit of risk. Vanguard ESG Corporate is currently generating about -0.32 per unit of risk. If you would invest  6,919  in Vanguard Total World on October 6, 2024 and sell it today you would lose (108.00) from holding Vanguard Total World or give up 1.56% of portfolio value over 90 days.

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

Vanguard Total World  vs.  Vanguard ESG Corporate

Vanguard Total World

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Total World has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable fundamental indicators, Vanguard Total is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Vanguard ESG Corporate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard ESG Corporate has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Vanguard ESG is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vanguard Total and Vanguard ESG

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

The idea behind Vanguard Total World and Vanguard ESG Corporate 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.