Correlation Between Vanguard Australian and Vanguard Diversified

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

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

Diversification Opportunities for Vanguard Australian and Vanguard Diversified

-0.39

Correlation Coefficient

Vanguard Australian  Vanguard Diversified

Very good diversification

The 3 months correlation between Vanguard and Vanguard is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Australian Fixed and Vanguard Diversified High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Diversified High and Vanguard Australian 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 Australian Fixed are associated (or correlated) with Vanguard Diversified. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Diversified High has no effect on the direction of Vanguard Australian i.e., Vanguard Australian and Vanguard Diversified go up and down completely randomly.

Pair Corralation between Vanguard Australian and Vanguard Diversified

Assuming the 90 days trading horizon Vanguard Australian Fixed is expected to under-perform the Vanguard Diversified. But the etf apears to be less risky and, when comparing its historical volatility, Vanguard Australian Fixed is 1.75 times less risky than Vanguard Diversified. The etf trades about -0.01 of its potential returns per unit of risk. The Vanguard Diversified High is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  6,511  in Vanguard Diversified High on September 12, 2024 and sell it today you would earn a total of  489.00  from holding Vanguard Diversified High or generate 7.51% return on investment over 90 days.

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

Vanguard Australian Fixed  vs.  Vanguard Diversified High

Vanguard Australian Fixed

Risk-Adjusted Performance

0 of 100

Very Weak

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

Vanguard Diversified High

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Diversified High are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Vanguard Diversified may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Vanguard Australian and Vanguard Diversified

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

The idea behind Vanguard Australian Fixed and Vanguard Diversified High 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.