Correlation Between ETFS Morningstar and Vanguard Total

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

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

Diversification Opportunities for ETFS Morningstar and Vanguard Total

0.86

Correlation Coefficient

ETFS Morningstar  Vanguard Total

Very poor diversification

The 3 months correlation between ETFS and Vanguard is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding ETFS Morningstar Global 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 ETFS Morningstar 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 ETFS Morningstar Global 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 ETFS Morningstar i.e., ETFS Morningstar and Vanguard Total go up and down completely randomly.

Pair Corralation between ETFS Morningstar and Vanguard Total

Assuming the 90 days trading horizon ETFS Morningstar Global is expected to generate 1.57 times more return on investment than Vanguard Total. However, ETFS Morningstar is 1.57 times more volatile than Vanguard Total Market. It trades about -0.07 of its potential returns per unit of risk. Vanguard Total Market is currently generating about -0.11 per unit of risk. If you would invest  11,378  in ETFS Morningstar Global on December 30, 2024 and sell it today you would lose (580.00) from holding ETFS Morningstar Global or give up 5.1% of portfolio value over 90 days.

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

ETFS Morningstar Global  vs.  Vanguard Total Market

ETFS Morningstar Global

Risk-Adjusted Performance

Very Weak

Over the last 90 days ETFS Morningstar Global has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, ETFS Morningstar is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Vanguard Total Market

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Total Market has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Vanguard Total is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with ETFS Morningstar and Vanguard Total

The main advantage of trading using opposite ETFS Morningstar and Vanguard Total positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ETFS Morningstar 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 ETFS Morningstar Global 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.

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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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.