Correlation Between Vanguard FTSE and Xtrackers FTSE

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

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

Diversification Opportunities for Vanguard FTSE and Xtrackers FTSE

0.98

Correlation Coefficient

Vanguard FTSE  Xtrackers FTSE

Almost no diversification

The 3 months correlation between Vanguard and Xtrackers is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard FTSE Developed and Xtrackers FTSE Developed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers FTSE Developed 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 Developed are associated (or correlated) with Xtrackers FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers FTSE Developed has no effect on the direction of Vanguard FTSE i.e., Vanguard FTSE and Xtrackers FTSE go up and down completely randomly.

Pair Corralation between Vanguard FTSE and Xtrackers FTSE

Considering the 90-day investment horizon Vanguard FTSE Developed is expected to generate 1.07 times more return on investment than Xtrackers FTSE. However, Vanguard FTSE is 1.07 times more volatile than Xtrackers FTSE Developed. It trades about 0.14 of its potential returns per unit of risk. Xtrackers FTSE Developed is currently generating about 0.15 per unit of risk. If you would invest  4,759  in Vanguard FTSE Developed on December 30, 2024 and sell it today you would earn a total of  365.00  from holding Vanguard FTSE Developed or generate 7.67% return on investment over 90 days.

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

Vanguard FTSE Developed  vs.  Xtrackers FTSE Developed

Vanguard FTSE Developed

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard FTSE Developed are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating technical and fundamental indicators, Vanguard FTSE may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Xtrackers FTSE Developed

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers FTSE Developed are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain technical and fundamental indicators, Xtrackers FTSE may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Vanguard FTSE and Xtrackers FTSE

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

The idea behind Vanguard FTSE Developed and Xtrackers FTSE Developed 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.