Correlation Between Wahed FTSE and Vanguard Total
Can any of the company-specific risk be diversified away by investing in both Wahed FTSE and Vanguard Total 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 Wahed FTSE and Vanguard Total into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wahed FTSE USA and Vanguard Total Stock, you can compare the effects of market volatilities on Wahed FTSE and Vanguard Total 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 Wahed FTSE with a short position of Vanguard Total. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wahed FTSE and Vanguard Total.
Diversification Opportunities for Wahed FTSE and Vanguard Total
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Wahed and Vanguard is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Wahed FTSE USA and Vanguard Total Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Total Stock and Wahed 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 Wahed FTSE USA are associated (or correlated) with Vanguard Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Total Stock has no effect on the direction of Wahed FTSE i.e., Wahed FTSE and Vanguard Total go up and down completely randomly.
Pair Corralation between Wahed FTSE and Vanguard Total
Given the investment horizon of 90 days Wahed FTSE is expected to generate 1.17 times less return on investment than Vanguard Total. In addition to that, Wahed FTSE is 1.02 times more volatile than Vanguard Total Stock. It trades about 0.1 of its total potential returns per unit of risk. Vanguard Total Stock is currently generating about 0.12 per unit of volatility. If you would invest 20,308 in Vanguard Total Stock on January 26, 2024 and sell it today you would earn a total of 4,757 from holding Vanguard Total Stock or generate 23.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wahed FTSE USA vs. Vanguard Total Stock
Performance |
| Timeline |
| Wahed FTSE USA |
| Vanguard Total Stock |
Wahed FTSE and Vanguard Total Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wahed FTSE and Vanguard Total
The main advantage of trading using opposite Wahed FTSE and Vanguard Total positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wahed FTSE position performs unexpectedly, Vanguard Total 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 Total will offset losses from the drop in Vanguard Total's long position.| Wahed FTSE vs. SPDR MSCI EAFE | Wahed FTSE vs. SPDR MSCI Emerging | Wahed FTSE vs. SPDR Russell 1000 | Wahed FTSE vs. SPDR Russell 1000 |
| Vanguard Total vs. SPDR MSCI EAFE | Vanguard Total vs. SPDR MSCI Emerging | Vanguard Total vs. SPDR Russell 1000 | Vanguard Total vs. SPDR Russell 1000 |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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