Correlation Between BetaShares Global and Vanguard Australian

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

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

Diversification Opportunities for BetaShares Global and Vanguard Australian

0.79

Correlation Coefficient

BetaShares Global  Vanguard Australian

Poor diversification

The 3 months correlation between BetaShares and Vanguard is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding BetaShares Global Robotics and Vanguard Australian Shares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Australian and BetaShares Global 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 BetaShares Global Robotics are associated (or correlated) with Vanguard Australian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Australian has no effect on the direction of BetaShares Global i.e., BetaShares Global and Vanguard Australian go up and down completely randomly.

Pair Corralation between BetaShares Global and Vanguard Australian

Assuming the 90 days trading horizon BetaShares Global Robotics is expected to generate 2.04 times more return on investment than Vanguard Australian. However, BetaShares Global is 2.04 times more volatile than Vanguard Australian Shares. It trades about 0.22 of its potential returns per unit of risk. Vanguard Australian Shares is currently generating about 0.37 per unit of risk. If you would invest  1,406  in BetaShares Global Robotics on September 4, 2024 and sell it today you would earn a total of  74.00  from holding BetaShares Global Robotics or generate 5.26% return on investment over 90 days.

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

BetaShares Global Robotics  vs.  Vanguard Australian Shares

BetaShares Global

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BetaShares Global Robotics are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, BetaShares Global unveiled solid returns over the last few months and may actually be approaching a breakup point.

Vanguard Australian

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Australian Shares are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Vanguard Australian may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with BetaShares Global and Vanguard Australian

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

The idea behind BetaShares Global Robotics and Vanguard Australian Shares 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.