Correlation Between Vanguard Total and Wahed FTSE

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

Diversification Opportunities for Vanguard Total and Wahed FTSE

0.93

Correlation Coefficient

Vanguard Total  Wahed FTSE

Almost no diversification

The 3 months correlation between Vanguard and Wahed is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Stock and Wahed FTSE USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wahed FTSE USA 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 Wahed FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wahed FTSE USA has no effect on the direction of Vanguard Total i.e., Vanguard Total and Wahed FTSE go up and down completely randomly.

Pair Corralation between Vanguard Total and Wahed FTSE

Considering the 90-day investment horizon Vanguard Total Stock is expected to generate 0.96 times more return on investment than Wahed FTSE. However, Vanguard Total Stock is 1.04 times less risky than Wahed FTSE. It trades about 0.2 of its potential returns per unit of risk. Wahed FTSE USA is currently generating about 0.08 per unit of risk. If you would invest  28,708  in Vanguard Total Stock on August 30, 2024 and sell it today you would earn a total of  1,112  from holding Vanguard Total Stock or generate 3.87% return on investment over 90 days.

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

Vanguard Total Stock  vs.  Wahed FTSE USA

Vanguard Total Stock

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Total Stock are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, Vanguard Total may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Wahed FTSE USA

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Wahed FTSE USA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Wahed FTSE is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Vanguard Total and Wahed FTSE

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

The idea behind Vanguard Total Stock and Wahed FTSE USA 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.