Correlation Between Vanguard Real and Vanguard FTSE

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

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

Diversification Opportunities for Vanguard Real and Vanguard FTSE

0.17

Correlation Coefficient

Vanguard Real  Vanguard FTSE

Average diversification

The 3 months correlation between Vanguard and Vanguard is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Real Estate and Vanguard FTSE Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard FTSE Emerging and Vanguard Real 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 Real Estate are associated (or correlated) with Vanguard FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard FTSE Emerging has no effect on the direction of Vanguard Real i.e., Vanguard Real and Vanguard FTSE go up and down completely randomly.

Pair Corralation between Vanguard Real and Vanguard FTSE

Considering the 90-day investment horizon Vanguard Real Estate is expected to generate 1.33 times more return on investment than Vanguard FTSE. However, Vanguard Real is 1.33 times more volatile than Vanguard FTSE Emerging. It trades about 0.06 of its potential returns per unit of risk. Vanguard FTSE Emerging is currently generating about 0.07 per unit of risk. If you would invest  7,227  in Vanguard Real Estate on June 13, 2024 and sell it today you would earn a total of  2,513  from holding Vanguard Real Estate or generate 34.77% return on investment over 90 days.

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

Vanguard Real Estate  vs.  Vanguard FTSE Emerging

Vanguard Real Estate

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Real Estate are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Vanguard Real reported solid returns over the last few months and may actually be approaching a breakup point.

Vanguard FTSE Emerging

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard FTSE Emerging are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Vanguard FTSE is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Vanguard Real and Vanguard FTSE

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

The idea behind Vanguard Real Estate and Vanguard FTSE Emerging 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.