Correlation Between Vanguard Growth and Columbia Emerging

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

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

Diversification Opportunities for Vanguard Growth and Columbia Emerging

-0.76

Correlation Coefficient

Vanguard Growth  Columbia Emerging

Pay attention - limited upside

The 3 months correlation between Vanguard and Columbia is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Growth Index and Columbia Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Emerging Markets and Vanguard Growth 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 Growth Index are associated (or correlated) with Columbia Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Emerging Markets has no effect on the direction of Vanguard Growth i.e., Vanguard Growth and Columbia Emerging go up and down completely randomly.

Pair Corralation between Vanguard Growth and Columbia Emerging

Considering the 90-day investment horizon Vanguard Growth Index is expected to generate 1.11 times more return on investment than Columbia Emerging. However, Vanguard Growth is 1.11 times more volatile than Columbia Emerging Markets. It trades about 0.13 of its potential returns per unit of risk. Columbia Emerging Markets is currently generating about 0.03 per unit of risk. If you would invest  23,056  in Vanguard Growth Index on October 5, 2024 and sell it today you would earn a total of  18,537  from holding Vanguard Growth Index or generate 80.4% return on investment over 90 days.

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

Vanguard Growth Index  vs.  Columbia Emerging Markets

Vanguard Growth Index

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Growth Index are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, Vanguard Growth may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Columbia Emerging Markets

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Columbia Emerging Markets has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

Pair Trading with Vanguard Growth and Columbia Emerging

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

The idea behind Vanguard Growth Index and Columbia Emerging Markets 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.