Correlation Between Vanguard Materials and Global X

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

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

Diversification Opportunities for Vanguard Materials and Global X

0.73

Correlation Coefficient

Vanguard Materials  Global X

Poor diversification

The 3 months correlation between Vanguard and Global is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Materials Index and Global X Copper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Copper and Vanguard Materials 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 Materials Index are associated (or correlated) with Global X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global X Copper has no effect on the direction of Vanguard Materials i.e., Vanguard Materials and Global X go up and down completely randomly.

Pair Corralation between Vanguard Materials and Global X

Considering the 90-day investment horizon Vanguard Materials Index is expected to generate 0.82 times more return on investment than Global X. However, Vanguard Materials Index is 1.21 times less risky than Global X. It trades about 0.24 of its potential returns per unit of risk. Global X Copper is currently generating about 0.13 per unit of risk. If you would invest  19,078  in Vanguard Materials Index on October 27, 2024 and sell it today you would earn a total of  773.00  from holding Vanguard Materials Index or generate 4.05% return on investment over 90 days.

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

Vanguard Materials Index  vs.  Global X Copper

Vanguard Materials Index

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Materials Index has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Vanguard Materials is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Global X Copper

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global X Copper has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

Pair Trading with Vanguard Materials and Global X

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

The idea behind Vanguard Materials Index and Global X Copper 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.