Correlation Between Vanguard Total and Xtrackers Russell

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

By analyzing existing cross correlation between Vanguard Total Stock and Xtrackers Russell Multifactor, you can compare the effects of market volatilities on Vanguard Total and Xtrackers 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 Total with a short position of Xtrackers Russell. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Total and Xtrackers Russell.

Diversification Opportunities for Vanguard Total and Xtrackers Russell

0.72

Correlation Coefficient

Vanguard Total  Xtrackers Russell

Poor diversification

The 3 months correlation between Vanguard and Xtrackers is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Stock and Xtrackers Russell Multifactor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers Russell and Vanguard Total 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 Total Stock are associated (or correlated) with Xtrackers Russell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers Russell has no effect on the direction of Vanguard Total i.e., Vanguard Total and Xtrackers Russell go up and down completely randomly.

Pair Corralation between Vanguard Total and Xtrackers Russell

Considering the 90-day investment horizon Vanguard Total Stock is expected to generate 1.05 times more return on investment than Xtrackers Russell. However, Vanguard Total is 1.05 times more volatile than Xtrackers Russell Multifactor. It trades about 0.11 of its potential returns per unit of risk. Xtrackers Russell Multifactor is currently generating about 0.07 per unit of risk. If you would invest  18,943  in Vanguard Total Stock on October 10, 2024 and sell it today you would earn a total of  10,198  from holding Vanguard Total Stock or generate 53.84% return on investment over 90 days.

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

Vanguard Total Stock  vs.  Xtrackers Russell Multifactor

Vanguard Total Stock

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Total Stock are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Vanguard Total is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Xtrackers Russell

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xtrackers Russell Multifactor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Xtrackers Russell is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Vanguard Total and Xtrackers Russell

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

The idea behind Vanguard Total Stock and Xtrackers Russell Multifactor 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.