Correlation Between Vanguard FTSE and Vanguard Value

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

Diversification Opportunities for Vanguard FTSE and Vanguard Value

0.45

Correlation Coefficient

Vanguard FTSE  Vanguard Value

Very weak diversification

The 3 months correlation between Vanguard and Vanguard is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard FTSE Developed and Vanguard Value Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Value Index 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 Vanguard Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Value Index has no effect on the direction of Vanguard FTSE i.e., Vanguard FTSE and Vanguard Value go up and down completely randomly.

Pair Corralation between Vanguard FTSE and Vanguard Value

Considering the 90-day investment horizon Vanguard FTSE Developed is expected to generate 1.13 times more return on investment than Vanguard Value. However, Vanguard FTSE is 1.13 times more volatile than Vanguard Value Index. It trades about 0.14 of its potential returns per unit of risk. Vanguard Value Index is currently generating about 0.04 per unit of risk. If you would invest  4,759  in Vanguard FTSE Developed on December 29, 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	Weak
Accuracy	100.0%
Values	Daily Returns

Vanguard FTSE Developed  vs.  Vanguard Value Index

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.

Vanguard Value Index

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Value Index are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Vanguard Value is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Vanguard FTSE and Vanguard Value

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

The idea behind Vanguard FTSE Developed and Vanguard Value Index 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.