Correlation Between Vanguard Developed and Gmo Emerging
Can any of the company-specific risk be diversified away by investing in both Vanguard Developed and Gmo 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 Vanguard Developed and Gmo Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Developed Markets and Gmo Emerging Markets, you can compare the effects of market volatilities on Vanguard Developed and Gmo 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 Vanguard Developed with a short position of Gmo Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Developed and Gmo Emerging.
Diversification Opportunities for Vanguard Developed and Gmo Emerging
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vanguard and Gmo is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Developed Markets and Gmo Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gmo Emerging Markets and Vanguard Developed 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 Developed Markets are associated (or correlated) with Gmo Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gmo Emerging Markets has no effect on the direction of Vanguard Developed i.e., Vanguard Developed and Gmo Emerging go up and down completely randomly.
Pair Corralation between Vanguard Developed and Gmo Emerging
Assuming the 90 days horizon Vanguard Developed is expected to generate 2.54 times less return on investment than Gmo Emerging. But when comparing it to its historical volatility, Vanguard Developed Markets is 1.07 times less risky than Gmo Emerging. It trades about 0.1 of its potential returns per unit of risk. Gmo Emerging Markets is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 1,262 in Gmo Emerging Markets on March 28, 2025 and sell it today you would earn a total of 48.00 from holding Gmo Emerging Markets or generate 3.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Developed Markets vs. Gmo Emerging Markets
Performance |
| Timeline |
| Vanguard Developed |
| Gmo Emerging Markets |
Vanguard Developed and Gmo Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Developed and Gmo Emerging
The main advantage of trading using opposite Vanguard Developed and Gmo Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Developed position performs unexpectedly, Gmo 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 Gmo Emerging will offset losses from the drop in Gmo Emerging's long position.| Vanguard Developed vs. Harbor Diversified International | Vanguard Developed vs. Global Diversified Income | Vanguard Developed vs. Victory Diversified Stock | Vanguard Developed vs. Putnam Diversified Income |
| Gmo Emerging vs. Wcm Focused Emerging | Gmo Emerging vs. Oberweis Emerging Growth | Gmo Emerging vs. Aqr Tm Emerging | Gmo Emerging vs. Saat Defensive Strategy |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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