Correlation Between Vanguard and Vanguard ESG

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

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

Diversification Opportunities for Vanguard and Vanguard ESG

0.28

Correlation Coefficient

Vanguard  Vanguard ESG

Modest diversification

The 3 months correlation between Vanguard and Vanguard is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard UK Gilt and Vanguard ESG Developed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard ESG Developed 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 UK Gilt are associated (or correlated) with Vanguard ESG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard ESG Developed has no effect on the direction of Vanguard i.e., Vanguard and Vanguard ESG go up and down completely randomly.

Pair Corralation between Vanguard and Vanguard ESG

Assuming the 90 days trading horizon Vanguard UK Gilt is expected to under-perform the Vanguard ESG. But the etf apears to be less risky and, when comparing its historical volatility, Vanguard UK Gilt is 1.56 times less risky than Vanguard ESG. The etf trades about -0.1 of its potential returns per unit of risk. The Vanguard ESG Developed is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  620.00  in Vanguard ESG Developed on October 26, 2024 and sell it today you would earn a total of  23.00  from holding Vanguard ESG Developed or generate 3.71% return on investment over 90 days.

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

Vanguard UK Gilt  vs.  Vanguard ESG Developed

Vanguard UK Gilt

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard UK Gilt has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Vanguard is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Vanguard ESG Developed

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard ESG Developed are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Vanguard ESG is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Vanguard and Vanguard ESG

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

The idea behind Vanguard UK Gilt and Vanguard ESG 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 Commodity Directory module to find actively traded commodities issued by global exchanges.