Correlation Between Vanguard Total and Russell Australian

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

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

Diversification Opportunities for Vanguard Total and Russell Australian

0.3

Correlation Coefficient

Vanguard Total  Russell Australian

Weak diversification

The 3 months correlation between Vanguard and Russell is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Market and Russell Australian SemiGovernm in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Russell Australian 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 Market are associated (or correlated) with Russell Australian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Russell Australian has no effect on the direction of Vanguard Total i.e., Vanguard Total and Russell Australian go up and down completely randomly.

Pair Corralation between Vanguard Total and Russell Australian

Assuming the 90 days trading horizon Vanguard Total Market is expected to generate 2.57 times more return on investment than Russell Australian. However, Vanguard Total is 2.57 times more volatile than Russell Australian SemiGovernment. It trades about 0.17 of its potential returns per unit of risk. Russell Australian SemiGovernment is currently generating about 0.05 per unit of risk. If you would invest  34,913  in Vanguard Total Market on October 7, 2024 and sell it today you would earn a total of  11,734  from holding Vanguard Total Market or generate 33.61% return on investment over 90 days.

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

Vanguard Total Market  vs.  Russell Australian SemiGovernm

Vanguard Total Market

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Total Market are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Vanguard Total may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Russell Australian

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Russell Australian SemiGovernment are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable primary indicators, Russell Australian is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Vanguard Total and Russell Australian

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

The idea behind Vanguard Total Market and Russell Australian SemiGovernment 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.