Correlation Between Vanguard and Global X

Can any of the company-specific risk be diversified away by investing in both Vanguard 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 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 SP 500 and Global X Pipelines, you can compare the effects of market volatilities on Vanguard 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 with a short position of Global X. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard and Global X.

Diversification Opportunities for Vanguard and Global X

0.92

Correlation Coefficient

Vanguard  Global X

Almost no diversification

The 3 months correlation between Vanguard and Global is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard SP 500 and Global X Pipelines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Pipelines and Vanguard 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 SP 500 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 Pipelines has no effect on the direction of Vanguard i.e., Vanguard and Global X go up and down completely randomly.

Pair Corralation between Vanguard and Global X

Assuming the 90 days trading horizon Vanguard SP 500 is expected to generate 0.77 times more return on investment than Global X. However, Vanguard SP 500 is 1.3 times less risky than Global X. It trades about 0.14 of its potential returns per unit of risk. Global X Pipelines is currently generating about 0.05 per unit of risk. If you would invest  9,401  in Vanguard SP 500 on September 4, 2024 and sell it today you would earn a total of  5,687  from holding Vanguard SP 500 or generate 60.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.8%
Values	Daily Returns

Vanguard SP 500  vs.  Global X Pipelines

Vanguard SP 500

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard SP 500 are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Vanguard displayed solid returns over the last few months and may actually be approaching a breakup point.

Global X Pipelines

Risk-Adjusted Performance

11 of 100

Good

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

Pair Trading with Vanguard and Global X

The main advantage of trading using opposite Vanguard and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard 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 SP 500 and Global X Pipelines 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.

Check out your portfolio center.

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.