Correlation Between Vanguard Australian and Australian High

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

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

Diversification Opportunities for Vanguard Australian and Australian High

0.83

Correlation Coefficient

Vanguard Australian  Australian High

Very poor diversification

The 3 months correlation between Vanguard and Australian is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Australian Shares and Australian High Interest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian High Interest 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 Shares are associated (or correlated) with Australian High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australian High Interest has no effect on the direction of Vanguard Australian i.e., Vanguard Australian and Australian High go up and down completely randomly.

Pair Corralation between Vanguard Australian and Australian High

Assuming the 90 days trading horizon Vanguard Australian Shares is expected to generate 31.42 times more return on investment than Australian High. However, Vanguard Australian is 31.42 times more volatile than Australian High Interest. It trades about 0.2 of its potential returns per unit of risk. Australian High Interest is currently generating about 0.93 per unit of risk. If you would invest  9,795  in Vanguard Australian Shares on September 4, 2024 and sell it today you would earn a total of  712.00  from holding Vanguard Australian Shares or generate 7.27% return on investment over 90 days.

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

Vanguard Australian Shares  vs.  Australian High Interest

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.

Australian High Interest

Risk-Adjusted Performance

72 of 100

Market Crasher

Compared to the overall equity markets, risk-adjusted returns on investments in Australian High Interest are ranked lower than 72 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Australian High is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Vanguard Australian and Australian High

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

The idea behind Vanguard Australian Shares and Australian High Interest 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..