Correlation Between Vanguard FTSE and Vanguard Russell

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

By analyzing existing cross correlation between Vanguard FTSE Canadian and Vanguard Russell 2000, you can compare the effects of market volatilities on Vanguard FTSE and Vanguard Russell 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 FTSE with a short position of Vanguard Russell. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard FTSE and Vanguard Russell.

Diversification Opportunities for Vanguard FTSE and Vanguard Russell

0.0

Correlation Coefficient

Vanguard FTSE  Vanguard Russell

Pay attention - limited upside

The 3 months correlation between Vanguard and Vanguard is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard FTSE Canadian and Vanguard Russell 2000 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Russell 2000 and Vanguard FTSE 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 FTSE Canadian are associated (or correlated) with Vanguard Russell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Russell 2000 has no effect on the direction of Vanguard FTSE i.e., Vanguard FTSE and Vanguard Russell go up and down completely randomly.

Pair Corralation between Vanguard FTSE and Vanguard Russell

If you would invest (100.00) in Vanguard Russell 2000 on December 31, 2024 and sell it today you would earn a total of  100.00  from holding Vanguard Russell 2000 or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Vanguard FTSE Canadian  vs.  Vanguard Russell 2000

Vanguard FTSE Canadian

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard FTSE Canadian has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward indicators, Vanguard FTSE is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Vanguard Russell 2000

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Russell 2000 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward indicators, Vanguard Russell is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vanguard FTSE and Vanguard Russell

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

The idea behind Vanguard FTSE Canadian and Vanguard Russell 2000 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.