Correlation Between International Equity and Vanguard Total

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

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

Diversification Opportunities for International Equity and Vanguard Total

0.99

Correlation Coefficient

International Equity  Vanguard Total

No risk reduction

The 3 months correlation between International and VANGUARD is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding International Equity Fund and Vanguard Total International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Total Inter and International Equity 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 International Equity Fund 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 Inter has no effect on the direction of International Equity i.e., International Equity and Vanguard Total go up and down completely randomly.

Pair Corralation between International Equity and Vanguard Total

Assuming the 90 days horizon International Equity Fund is expected to generate 1.05 times more return on investment than Vanguard Total. However, International Equity is 1.05 times more volatile than Vanguard Total International. It trades about 0.17 of its potential returns per unit of risk. Vanguard Total International is currently generating about 0.14 per unit of risk. If you would invest  1,314  in International Equity Fund on December 25, 2024 and sell it today you would earn a total of  115.00  from holding International Equity Fund or generate 8.75% return on investment over 90 days.

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

International Equity Fund  vs.  Vanguard Total International

International Equity

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in International Equity Fund are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, International Equity may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Vanguard Total Inter

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Total International are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Vanguard Total may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with International Equity and Vanguard Total

The main advantage of trading using opposite International Equity and Vanguard Total positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Equity 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 International Equity Fund and Vanguard Total International 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.