Correlation Between Vanguard Total and ETFS Morningstar

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

Diversification Opportunities for Vanguard Total and ETFS Morningstar

0.86

Correlation Coefficient

Vanguard Total  ETFS Morningstar

Very poor diversification

The 3 months correlation between Vanguard and ETFS is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Market and ETFS Morningstar Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETFS Morningstar Global 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 ETFS Morningstar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETFS Morningstar Global has no effect on the direction of Vanguard Total i.e., Vanguard Total and ETFS Morningstar go up and down completely randomly.

Pair Corralation between Vanguard Total and ETFS Morningstar

Assuming the 90 days trading horizon Vanguard Total Market is expected to under-perform the ETFS Morningstar. But the etf apears to be less risky and, when comparing its historical volatility, Vanguard Total Market is 1.57 times less risky than ETFS Morningstar. The etf trades about -0.11 of its potential returns per unit of risk. The ETFS Morningstar Global is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  11,378  in ETFS Morningstar Global on December 30, 2024 and sell it today you would lose (580.00) from holding ETFS Morningstar Global or give up 5.1% of portfolio value over 90 days.

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

Vanguard Total Market  vs.  ETFS Morningstar Global

Vanguard Total Market

Risk-Adjusted Performance

Very Weak

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

ETFS Morningstar Global

Risk-Adjusted Performance

Very Weak

Over the last 90 days ETFS Morningstar Global has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, ETFS Morningstar 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 ETFS Morningstar

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

The idea behind Vanguard Total Market and ETFS Morningstar Global 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..