Correlation Between Vanguard Global and Betashares Wealth

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

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

Diversification Opportunities for Vanguard Global and Betashares Wealth

0.76

Correlation Coefficient

Vanguard Global  Betashares Wealth

Poor diversification

The 3 months correlation between Vanguard and Betashares is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Global Infrastructure and Betashares Wealth Builder in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Betashares Wealth Builder and Vanguard Global 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 Global Infrastructure are associated (or correlated) with Betashares Wealth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Betashares Wealth Builder has no effect on the direction of Vanguard Global i.e., Vanguard Global and Betashares Wealth go up and down completely randomly.

Pair Corralation between Vanguard Global and Betashares Wealth

Assuming the 90 days trading horizon Vanguard Global is expected to generate 1.12 times less return on investment than Betashares Wealth. But when comparing it to its historical volatility, Vanguard Global Infrastructure is 1.13 times less risky than Betashares Wealth. It trades about 0.16 of its potential returns per unit of risk. Betashares Wealth Builder is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  2,737  in Betashares Wealth Builder on September 3, 2024 and sell it today you would earn a total of  231.00  from holding Betashares Wealth Builder or generate 8.44% return on investment over 90 days.

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

Vanguard Global Infrastructure  vs.  Betashares Wealth Builder

Vanguard Global Infr

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Global Infrastructure are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Vanguard Global may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Betashares Wealth Builder

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Betashares Wealth Builder are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Betashares Wealth may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Vanguard Global and Betashares Wealth

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

The idea behind Vanguard Global Infrastructure and Betashares Wealth Builder 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.