Correlation Between Vanguard FTSE and Vanguard Communication

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

By analyzing existing cross correlation between Vanguard FTSE Europe and Vanguard Communication Services, you can compare the effects of market volatilities on Vanguard FTSE and Vanguard Communication 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 Vanguard Communication. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard FTSE and Vanguard Communication.

Diversification Opportunities for Vanguard FTSE and Vanguard Communication

0.85

Correlation Coefficient

Vanguard FTSE  Vanguard Communication

Very poor diversification

The 3 months correlation between Vanguard and Vanguard is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard FTSE Europe and Vanguard Communication Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Communication 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 Europe are associated (or correlated) with Vanguard Communication. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Communication has no effect on the direction of Vanguard FTSE i.e., Vanguard FTSE and Vanguard Communication go up and down completely randomly.

Pair Corralation between Vanguard FTSE and Vanguard Communication

Considering the 90-day investment horizon Vanguard FTSE is expected to generate 4.09 times less return on investment than Vanguard Communication. But when comparing it to its historical volatility, Vanguard FTSE Europe is 1.16 times less risky than Vanguard Communication. It trades about 0.07 of its potential returns per unit of risk. Vanguard Communication Services is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  15,056  in Vanguard Communication Services on May 6, 2025 and sell it today you would earn a total of  2,093  from holding Vanguard Communication Services or generate 13.9% return on investment over 90 days.

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

Vanguard FTSE Europe  vs.  Vanguard Communication Service

Vanguard FTSE Europe

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard FTSE Europe are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent technical and fundamental indicators, Vanguard FTSE is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Vanguard Communication

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Communication Services are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Vanguard Communication showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vanguard FTSE and Vanguard Communication

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

The idea behind Vanguard FTSE Europe and Vanguard Communication Services 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.