Correlation Between Vanguard Australian and Betashares Inflation

Can any of the company-specific risk be diversified away by investing in both Vanguard Australian and Betashares Inflation 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 Betashares Inflation 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 Betashares Inflation Protected Treasury, you can compare the effects of market volatilities on Vanguard Australian and Betashares Inflation 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 Betashares Inflation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Australian and Betashares Inflation.

Diversification Opportunities for Vanguard Australian and Betashares Inflation

0.51

Correlation Coefficient

Vanguard Australian  Betashares Inflation

Very weak diversification

The 3 months correlation between Vanguard and Betashares is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Australian Shares and Betashares Inflation Protected in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Betashares Inflation 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 Betashares Inflation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Betashares Inflation has no effect on the direction of Vanguard Australian i.e., Vanguard Australian and Betashares Inflation go up and down completely randomly.

Pair Corralation between Vanguard Australian and Betashares Inflation

Assuming the 90 days trading horizon Vanguard Australian Shares is expected to under-perform the Betashares Inflation. In addition to that, Vanguard Australian is 2.37 times more volatile than Betashares Inflation Protected Treasury. It trades about -0.06 of its total potential returns per unit of risk. Betashares Inflation Protected Treasury is currently generating about 0.08 per unit of volatility. If you would invest  2,554  in Betashares Inflation Protected Treasury on December 2, 2024 and sell it today you would earn a total of  35.00  from holding Betashares Inflation Protected Treasury or generate 1.37% return on investment over 90 days.

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

Vanguard Australian Shares  vs.  Betashares Inflation Protected

Vanguard Australian

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Australian Shares has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic 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.

Betashares Inflation

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Betashares Inflation Protected Treasury are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Betashares Inflation 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 Vanguard Australian and Betashares Inflation

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

The idea behind Vanguard Australian Shares and Betashares Inflation Protected Treasury 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.