Correlation Between Global X and Vanguard Total

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

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

Diversification Opportunities for Global X and Vanguard Total

-0.37

Correlation Coefficient

Global X  Vanguard Total

Very good diversification

The 3 months correlation between Global and Vanguard is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Global X Semiconductor and Vanguard Total Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Total Market 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 Semiconductor are associated (or correlated) with Vanguard Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Total Market has no effect on the direction of Global X i.e., Global X and Vanguard Total go up and down completely randomly.

Pair Corralation between Global X and Vanguard Total

Assuming the 90 days trading horizon Global X Semiconductor is expected to generate 1.65 times more return on investment than Vanguard Total. However, Global X is 1.65 times more volatile than Vanguard Total Market. It trades about -0.05 of its potential returns per unit of risk. Vanguard Total Market is currently generating about -0.24 per unit of risk. If you would invest  3,886  in Global X Semiconductor on October 5, 2024 and sell it today you would lose (70.00) from holding Global X Semiconductor or give up 1.8% of portfolio value over 90 days.

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

Global X Semiconductor  vs.  Vanguard Total Market

Global X Semiconductor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global X Semiconductor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Global X is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Vanguard Total Market

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Total Market are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Vanguard Total is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Global X and Vanguard Total

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

The idea behind Global X Semiconductor and Vanguard Total Market 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.

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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.