Correlation Between Vanguard Global and Vanguard Energy

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

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

Diversification Opportunities for Vanguard Global and Vanguard Energy

0.39

Correlation Coefficient

Vanguard Global  Vanguard Energy

Weak diversification

The 3 months correlation between Vanguard and Vanguard is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Global Capital and Vanguard Energy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Energy and Vanguard Global 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 Global Capital are associated (or correlated) with Vanguard Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Energy has no effect on the direction of Vanguard Global i.e., Vanguard Global and Vanguard Energy go up and down completely randomly.

Pair Corralation between Vanguard Global and Vanguard Energy

Assuming the 90 days horizon Vanguard Global Capital is expected to generate 1.2 times more return on investment than Vanguard Energy. However, Vanguard Global is 1.2 times more volatile than Vanguard Energy Fund. It trades about 0.18 of its potential returns per unit of risk. Vanguard Energy Fund is currently generating about 0.19 per unit of risk. If you would invest  1,262  in Vanguard Global Capital on December 30, 2024 and sell it today you would earn a total of  139.00  from holding Vanguard Global Capital or generate 11.01% return on investment over 90 days.

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

Vanguard Global Capital  vs.  Vanguard Energy Fund

Vanguard Global Capital

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Global Capital are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak primary indicators, Vanguard Global may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Vanguard Energy

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Energy Fund are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Vanguard Energy may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Vanguard Global and Vanguard Energy

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

The idea behind Vanguard Global Capital and Vanguard Energy Fund 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.