Correlation Between Vanguard Communication and Global X

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

Diversification Opportunities for Vanguard Communication and Global X

-0.58

Correlation Coefficient

Vanguard Communication  Global X

Excellent diversification

The 3 months correlation between Vanguard and Global is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Communication Service and Global X MSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X MSCI and Vanguard Communication 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 Communication Services 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 MSCI has no effect on the direction of Vanguard Communication i.e., Vanguard Communication and Global X go up and down completely randomly.

Pair Corralation between Vanguard Communication and Global X

Considering the 90-day investment horizon Vanguard Communication Services is expected to generate 0.45 times more return on investment than Global X. However, Vanguard Communication Services is 2.24 times less risky than Global X. It trades about -0.08 of its potential returns per unit of risk. Global X MSCI is currently generating about -0.04 per unit of risk. If you would invest  16,070  in Vanguard Communication Services on October 7, 2024 and sell it today you would lose (319.00) from holding Vanguard Communication Services or give up 1.99% of portfolio value over 90 days.

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

Vanguard Communication Service  vs.  Global X MSCI

Vanguard Communication

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Communication Services are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Vanguard Communication may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Global X MSCI

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global X MSCI has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Etf's forward indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the ETF retail investors.

Pair Trading with Vanguard Communication and Global X

The main advantage of trading using opposite Vanguard Communication and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Communication 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 Communication Services and Global X MSCI 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.