Correlation Between Vanguard Global and Vanguard Dividend

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

By analyzing existing cross correlation between Vanguard Global Value and Vanguard Dividend Appreciation, you can compare the effects of market volatilities on Vanguard Global and Vanguard Dividend 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 Global with a short position of Vanguard Dividend. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Global and Vanguard Dividend.

Diversification Opportunities for Vanguard Global and Vanguard Dividend

0.98

Correlation Coefficient

Vanguard Global  Vanguard Dividend

Almost no diversification

The 3 months correlation between Vanguard and Vanguard is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Global Value and Vanguard Dividend Appreciation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Dividend and Vanguard Global 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 Global Value are associated (or correlated) with Vanguard Dividend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Dividend has no effect on the direction of Vanguard Global i.e., Vanguard Global and Vanguard Dividend go up and down completely randomly.

Pair Corralation between Vanguard Global and Vanguard Dividend

Assuming the 90 days trading horizon Vanguard Global Value is expected to generate 1.48 times more return on investment than Vanguard Dividend. However, Vanguard Global is 1.48 times more volatile than Vanguard Dividend Appreciation. It trades about 0.22 of its potential returns per unit of risk. Vanguard Dividend Appreciation is currently generating about 0.25 per unit of risk. If you would invest  4,788  in Vanguard Global Value on April 23, 2025 and sell it today you would earn a total of  703.00  from holding Vanguard Global Value or generate 14.68% return on investment over 90 days.

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

Vanguard Global Value  vs.  Vanguard Dividend Appreciation

Vanguard Global Value

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Global Value are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating essential indicators, Vanguard Global displayed solid returns over the last few months and may actually be approaching a breakup point.

Vanguard Dividend

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Dividend Appreciation are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical indicators, Vanguard Dividend may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Vanguard Global and Vanguard Dividend

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

The idea behind Vanguard Global Value and Vanguard Dividend Appreciation 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.