Correlation Between Vanguard Global and Vanguard Russell

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

By analyzing existing cross correlation between Vanguard Global ex US and Vanguard Russell 1000, you can compare the effects of market volatilities on Vanguard Global and Vanguard Russell 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 Russell. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Global and Vanguard Russell.

Diversification Opportunities for Vanguard Global and Vanguard Russell

0.82

Correlation Coefficient

Vanguard Global  Vanguard Russell

Very poor diversification

The 3 months correlation between Vanguard and Vanguard is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Global ex US and Vanguard Russell 1000 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Russell 1000 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 ex US are associated (or correlated) with Vanguard Russell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Russell 1000 has no effect on the direction of Vanguard Global i.e., Vanguard Global and Vanguard Russell go up and down completely randomly.

Pair Corralation between Vanguard Global and Vanguard Russell

Given the investment horizon of 90 days Vanguard Global ex US is expected to under-perform the Vanguard Russell. In addition to that, Vanguard Global is 1.06 times more volatile than Vanguard Russell 1000. It trades about -0.04 of its total potential returns per unit of risk. Vanguard Russell 1000 is currently generating about -0.03 per unit of volatility. If you would invest  8,671  in Vanguard Russell 1000 on December 1, 2024 and sell it today you would lose (136.00) from holding Vanguard Russell 1000 or give up 1.57% of portfolio value over 90 days.

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

Vanguard Global ex US  vs.  Vanguard Russell 1000

Vanguard Global ex

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Global ex US has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Vanguard Global is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Vanguard Russell 1000

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Russell 1000 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Vanguard Russell 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 Global and Vanguard Russell

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

The idea behind Vanguard Global ex US and Vanguard Russell 1000 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.