Correlation Between Global Bond and Vanguard Total

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Can any of the company-specific risk be diversified away by investing in both Global Bond 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 Global Bond and Vanguard Total into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global Bond Fund and Vanguard Total International, you can compare the effects of market volatilities on Global Bond 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 Global Bond with a short position of Vanguard Total. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Bond and Vanguard Total.

Diversification Opportunities for Global Bond and Vanguard Total

0.98
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Global and Vanguard is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Global Bond Fund and Vanguard Total International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Total Inter and Global Bond 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 Global Bond Fund 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 Inter has no effect on the direction of Global Bond i.e., Global Bond and Vanguard Total go up and down completely randomly.

Pair Corralation between Global Bond and Vanguard Total

Assuming the 90 days horizon Global Bond Fund is expected to under-perform the Vanguard Total. But the mutual fund apears to be less risky and, when comparing its historical volatility, Global Bond Fund is 1.13 times less risky than Vanguard Total. The mutual fund trades about -0.09 of its potential returns per unit of risk. The Vanguard Total International is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  2,670  in Vanguard Total International on April 5, 2022 and sell it today you would lose (2.00)  from holding Vanguard Total International or give up 0.07% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Global Bond Fund  vs.  Vanguard Total International

 Performance (%) 
      Timeline 
Global Bond Fund 
Global Performance
0 of 100
Over the last 90 days Global Bond Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Global Bond is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Global Price Channel

Vanguard Total Inter 
Vanguard Performance
0 of 100
Over the last 90 days Vanguard Total International has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong essential indicators, Vanguard Total is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Vanguard Price Channel

Global Bond and Vanguard Total Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Global Bond and Vanguard Total

The main advantage of trading using opposite Global Bond and Vanguard Total positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Bond 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.

Global Bond Fund

Pair trading matchups for Global Bond

The idea behind Global Bond Fund and Vanguard Total International 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.

Vanguard Total International

Pair trading matchups for Vanguard Total

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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.

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