Correlation Between Vanguard International and Vanguard Core

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

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

Diversification Opportunities for Vanguard International and Vanguard Core

0.89

Correlation Coefficient

Vanguard International  Vanguard Core

Very poor diversification

The 3 months correlation between Vanguard and Vanguard is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard International Core and Vanguard E Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard E Bond and Vanguard International 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 International Core are associated (or correlated) with Vanguard Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard E Bond has no effect on the direction of Vanguard International i.e., Vanguard International and Vanguard Core go up and down completely randomly.

Pair Corralation between Vanguard International and Vanguard Core

Assuming the 90 days horizon Vanguard International Core is expected to generate 2.92 times more return on investment than Vanguard Core. However, Vanguard International is 2.92 times more volatile than Vanguard E Bond. It trades about 0.14 of its potential returns per unit of risk. Vanguard E Bond is currently generating about 0.13 per unit of risk. If you would invest  1,278  in Vanguard International Core on December 30, 2024 and sell it today you would earn a total of  102.00  from holding Vanguard International Core or generate 7.98% return on investment over 90 days.

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

Vanguard International Core  vs.  Vanguard E Bond

Vanguard International

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard International Core are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Vanguard International may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Vanguard E Bond

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard E Bond are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Vanguard Core 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 International and Vanguard Core

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

The idea behind Vanguard International Core and Vanguard E Bond 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.

Check out your portfolio center.

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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.