Correlation Between Vanguard Emerging and New World
Can any of the company-specific risk be diversified away by investing in both Vanguard Emerging and New 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 Emerging and New World into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Emerging Markets and New World Fund, you can compare the effects of market volatilities on Vanguard Emerging and New 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 Emerging with a short position of New World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Emerging and New World.
Diversification Opportunities for Vanguard Emerging and New World
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vanguard and New is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Emerging Markets and New World Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New World Fund and Vanguard Emerging 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 Emerging Markets are associated (or correlated) with New World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New World Fund has no effect on the direction of Vanguard Emerging i.e., Vanguard Emerging and New World go up and down completely randomly.
Pair Corralation between Vanguard Emerging and New World
Assuming the 90 days horizon Vanguard Emerging is expected to generate 2.95 times less return on investment than New World. But when comparing it to its historical volatility, Vanguard Emerging Markets is 1.03 times less risky than New World. It trades about 0.01 of its potential returns per unit of risk. New World Fund is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 6,585 in New World Fund on January 21, 2024 and sell it today you would earn a total of 626.00 from holding New World Fund or generate 9.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Emerging Markets vs. New World Fund
Performance |
| Timeline |
| Vanguard Emerging Markets |
| New World Fund |
Vanguard Emerging and New World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Emerging and New World
The main advantage of trading using opposite Vanguard Emerging and New World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Emerging position performs unexpectedly, New 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 New World will offset losses from the drop in New World's long position.| Vanguard Emerging vs. Vanguard Materials Index | Vanguard Emerging vs. Vanguard Limited Term Tax Exempt | Vanguard Emerging vs. Vanguard Limited Term Tax Exempt | Vanguard Emerging vs. Vanguard Global Minimum |
| New World vs. Income Fund Of | New World vs. American Mutual Fund | New World vs. American Mutual Fund | New World vs. American Funds Income |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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