Correlation Between Vanguard Inflation and Capital World
Can any of the company-specific risk be diversified away by investing in both Vanguard Inflation and Capital 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 Inflation and Capital World into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Inflation Protected Securities and Capital World Growth, you can compare the effects of market volatilities on Vanguard Inflation and Capital 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 Inflation with a short position of Capital World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Inflation and Capital World.
Diversification Opportunities for Vanguard Inflation and Capital World
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between Vanguard and Capital is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Inflation Protected S and Capital World Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital World Growth and Vanguard Inflation 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 Inflation Protected Securities are associated (or correlated) with Capital World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital World Growth has no effect on the direction of Vanguard Inflation i.e., Vanguard Inflation and Capital World go up and down completely randomly.
Pair Corralation between Vanguard Inflation and Capital World
Assuming the 90 days horizon Vanguard Inflation Protected Securities is expected to generate 0.47 times more return on investment than Capital World. However, Vanguard Inflation Protected Securities is 2.13 times less risky than Capital World. It trades about -0.16 of its potential returns per unit of risk. Capital World Growth is currently generating about -0.13 per unit of risk. If you would invest 2,289 in Vanguard Inflation Protected Securities on January 25, 2024 and sell it today you would lose (27.00) from holding Vanguard Inflation Protected Securities or give up 1.18% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Inflation Protected S vs. Capital World Growth
Performance |
| Timeline |
| Vanguard Inflation |
| Capital World Growth |
Vanguard Inflation and Capital World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Inflation and Capital World
The main advantage of trading using opposite Vanguard Inflation and Capital World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Inflation position performs unexpectedly, Capital 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 Capital World will offset losses from the drop in Capital World's long position.The idea behind Vanguard Inflation Protected Securities and Capital World Growth 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.
| Capital World vs. American Funds Capital | Capital World vs. American Funds Capital | Capital World vs. Capital World Growth | Capital World vs. Capital World Growth |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
Other Complementary Tools
| Insider Screener Find insiders across different sectors to evaluate their impact on performance | |
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world | |
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities |