Correlation Between Tax-managed International and Vanguard Emerging
Can any of the company-specific risk be diversified away by investing in both Tax-managed International and Vanguard Emerging 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 Tax-managed International and Vanguard Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tax Managed International Equity and Vanguard Emerging Markets, you can compare the effects of market volatilities on Tax-managed International and Vanguard Emerging 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 Tax-managed International with a short position of Vanguard Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tax-managed International and Vanguard Emerging.
Diversification Opportunities for Tax-managed International and Vanguard Emerging
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Tax-managed and Vanguard is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Tax Managed International Equi and Vanguard Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Emerging Markets and Tax-managed International 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 Tax Managed International Equity are associated (or correlated) with Vanguard Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Emerging Markets has no effect on the direction of Tax-managed International i.e., Tax-managed International and Vanguard Emerging go up and down completely randomly.
Pair Corralation between Tax-managed International and Vanguard Emerging
Assuming the 90 days horizon Tax-managed International is expected to generate 1.87 times less return on investment than Vanguard Emerging. But when comparing it to its historical volatility, Tax Managed International Equity is 1.34 times less risky than Vanguard Emerging. It trades about 0.11 of its potential returns per unit of risk. Vanguard Emerging Markets is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 2,580 in Vanguard Emerging Markets on August 28, 2025 and sell it today you would earn a total of 223.00 from holding Vanguard Emerging Markets or generate 8.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tax Managed International Equi vs. Vanguard Emerging Markets
Performance |
| Timeline |
| Tax-managed International |
| Vanguard Emerging Markets |
Tax-managed International and Vanguard Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tax-managed International and Vanguard Emerging
The main advantage of trading using opposite Tax-managed International and Vanguard Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tax-managed International position performs unexpectedly, Vanguard Emerging 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 Emerging will offset losses from the drop in Vanguard Emerging's long position.The idea behind Tax Managed International Equity and Vanguard Emerging Markets 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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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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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