Correlation Between Vanguard Index and Vanguard World

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

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

Diversification Opportunities for Vanguard Index and Vanguard World

0.0

Correlation Coefficient

Vanguard Index  Vanguard World

Pay attention - limited upside

The 3 months correlation between Vanguard and Vanguard is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Index Funds and Vanguard World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard World and Vanguard Index 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 Index Funds are associated (or correlated) with Vanguard World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard World has no effect on the direction of Vanguard Index i.e., Vanguard Index and Vanguard World go up and down completely randomly.

Pair Corralation between Vanguard Index and Vanguard World

If you would invest  0.00  in Vanguard World on October 6, 2024 and sell it today you would earn a total of  0.00  from holding Vanguard World or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	5.26%
Values	Daily Returns

Vanguard Index Funds  vs.  Vanguard World

Vanguard Index Funds

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Index Funds are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Vanguard Index showed solid returns over the last few months and may actually be approaching a breakup point.

Vanguard World

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Vanguard World has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Vanguard World is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vanguard Index and Vanguard World

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

The idea behind Vanguard Index Funds and Vanguard World 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.