Correlation Between Vanguard FTSE and Dynamic Active

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

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

Diversification Opportunities for Vanguard FTSE and Dynamic Active

0.6

Correlation Coefficient

Vanguard FTSE  Dynamic Active

Poor diversification

The 3 months correlation between Vanguard and Dynamic is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard FTSE Developed and Dynamic Active International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dynamic Active Inter and Vanguard FTSE 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 FTSE Developed are associated (or correlated) with Dynamic Active. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dynamic Active Inter has no effect on the direction of Vanguard FTSE i.e., Vanguard FTSE and Dynamic Active go up and down completely randomly.

Pair Corralation between Vanguard FTSE and Dynamic Active

Assuming the 90 days trading horizon Vanguard FTSE is expected to generate 1.0 times less return on investment than Dynamic Active. But when comparing it to its historical volatility, Vanguard FTSE Developed is 1.26 times less risky than Dynamic Active. It trades about 0.23 of its potential returns per unit of risk. Dynamic Active International is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  2,256  in Dynamic Active International on April 24, 2025 and sell it today you would earn a total of  195.00  from holding Dynamic Active International or generate 8.64% return on investment over 90 days.

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

Vanguard FTSE Developed  vs.  Dynamic Active International

Vanguard FTSE Developed

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard FTSE Developed are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical and fundamental indicators, Vanguard FTSE may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Dynamic Active Inter

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dynamic Active International are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Dynamic Active may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Vanguard FTSE and Dynamic Active

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

The idea behind Vanguard FTSE Developed and Dynamic Active 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.

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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.