Correlation Between Vanguard FTSE and ETC Group

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

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

Diversification Opportunities for Vanguard FTSE and ETC Group

-0.65

Correlation Coefficient

Vanguard FTSE  ETC Group

Excellent diversification

The 3 months correlation between Vanguard and ETC is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard FTSE Developed and ETC Group Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETC Group Global and Vanguard FTSE 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 FTSE Developed are associated (or correlated) with ETC Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETC Group Global has no effect on the direction of Vanguard FTSE i.e., Vanguard FTSE and ETC Group go up and down completely randomly.

Pair Corralation between Vanguard FTSE and ETC Group

Assuming the 90 days trading horizon Vanguard FTSE Developed is expected to generate 0.46 times more return on investment than ETC Group. However, Vanguard FTSE Developed is 2.19 times less risky than ETC Group. It trades about 0.19 of its potential returns per unit of risk. ETC Group Global is currently generating about -0.12 per unit of risk. If you would invest  4,632  in Vanguard FTSE Developed on December 30, 2024 and sell it today you would earn a total of  591.00  from holding Vanguard FTSE Developed or generate 12.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Vanguard FTSE Developed  vs.  ETC Group Global

Vanguard FTSE Developed

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard FTSE Developed are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Vanguard FTSE may actually be approaching a critical reversion point that can send shares even higher in April 2025.

ETC Group Global

Risk-Adjusted Performance

Very Weak

Over the last 90 days ETC Group Global has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Etf's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the exchange-traded fund private investors.

Pair Trading with Vanguard FTSE and ETC Group

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

The idea behind Vanguard FTSE Developed and ETC Group 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.