Correlation Between Vanguard Growth and Vanguard FTSE

Can any of the company-specific risk be diversified away by investing in both Vanguard Growth 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 Growth 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 Growth Index and Vanguard FTSE Developed, you can compare the effects of market volatilities on Vanguard Growth 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 Growth with a short position of Vanguard FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Growth and Vanguard FTSE.

Diversification Opportunities for Vanguard Growth and Vanguard FTSE

0.86

Correlation Coefficient

Vanguard Growth  Vanguard FTSE

Very poor diversification

The 3 months correlation between Vanguard and Vanguard is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Growth Index and Vanguard FTSE Developed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard FTSE Developed and Vanguard Growth 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 Growth Index 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 Developed has no effect on the direction of Vanguard Growth i.e., Vanguard Growth and Vanguard FTSE go up and down completely randomly.

Pair Corralation between Vanguard Growth and Vanguard FTSE

Considering the 90-day investment horizon Vanguard Growth Index is expected to under-perform the Vanguard FTSE. In addition to that, Vanguard Growth is 1.42 times more volatile than Vanguard FTSE Developed. It trades about -0.29 of its total potential returns per unit of risk. Vanguard FTSE Developed is currently generating about -0.2 per unit of volatility. If you would invest  4,987  in Vanguard FTSE Developed on January 24, 2024 and sell it today you would lose (149.00) from holding Vanguard FTSE Developed or give up 2.99% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.24%
Values	Daily Returns

Vanguard Growth Index  vs.  Vanguard FTSE Developed

Vanguard Growth Index

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Growth Index are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Vanguard Growth is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Vanguard FTSE Developed

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard FTSE Developed are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, Vanguard FTSE is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vanguard Growth and Vanguard FTSE

The main advantage of trading using opposite Vanguard Growth and Vanguard FTSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Growth 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 Growth Index and Vanguard FTSE Developed 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.