Correlation Between Vanguard Communication and Dimensional International

Can any of the company-specific risk be diversified away by investing in both Vanguard Communication and Dimensional International 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 Dimensional International 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 Dimensional International High, you can compare the effects of market volatilities on Vanguard Communication and Dimensional International 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 Dimensional International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Communication and Dimensional International.

Diversification Opportunities for Vanguard Communication and Dimensional International

-0.38

Correlation Coefficient

Vanguard Communication  Dimensional International

Very good diversification

The 3 months correlation between Vanguard and Dimensional is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Communication Service and Dimensional International High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dimensional International 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 Dimensional International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dimensional International has no effect on the direction of Vanguard Communication i.e., Vanguard Communication and Dimensional International go up and down completely randomly.

Pair Corralation between Vanguard Communication and Dimensional International

Considering the 90-day investment horizon Vanguard Communication Services is expected to generate 1.3 times more return on investment than Dimensional International. However, Vanguard Communication is 1.3 times more volatile than Dimensional International High. It trades about 0.15 of its potential returns per unit of risk. Dimensional International High is currently generating about -0.15 per unit of risk. If you would invest  14,518  in Vanguard Communication Services on October 8, 2024 and sell it today you would earn a total of  1,233  from holding Vanguard Communication Services or generate 8.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Vanguard Communication Service  vs.  Dimensional International High

Vanguard Communication

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Communication Services are ranked lower than 11 (%) 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.

Dimensional International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dimensional International High has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Etf's technical indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the ETF retail investors.

Pair Trading with Vanguard Communication and Dimensional International

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

The idea behind Vanguard Communication Services and Dimensional International High 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.