Correlation Between Vanguard Long and Global X

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

Diversification Opportunities for Vanguard Long and Global X

0.89

Correlation Coefficient

Vanguard Long  Global X

Very poor diversification

The 3 months correlation between Vanguard and Global is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Long Term Treasury and Global X Short Term in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Short and Vanguard Long 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 Long Term Treasury 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 Short has no effect on the direction of Vanguard Long i.e., Vanguard Long and Global X go up and down completely randomly.

Pair Corralation between Vanguard Long and Global X

Given the investment horizon of 90 days Vanguard Long Term Treasury is expected to under-perform the Global X. In addition to that, Vanguard Long is 6.48 times more volatile than Global X Short Term. It trades about -0.14 of its total potential returns per unit of risk. Global X Short Term is currently generating about 0.15 per unit of volatility. If you would invest  4,994  in Global X Short Term on December 29, 2024 and sell it today you would earn a total of  16.00  from holding Global X Short Term or generate 0.32% return on investment over 90 days.

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

Vanguard Long Term Treasury  vs.  Global X Short Term

Vanguard Long Term

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Long Term Treasury are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, Vanguard Long is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Global X Short

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Short Term are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental indicators, Global X is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Vanguard Long and Global X

The main advantage of trading using opposite Vanguard Long and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Long 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 Long Term Treasury and Global X Short Term 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.