Correlation Between Vanguard Communication and Vanguard FTSE

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

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

Diversification Opportunities for Vanguard Communication and Vanguard FTSE

0.85

Correlation Coefficient

Vanguard Communication  Vanguard FTSE

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 Communication Service and Vanguard FTSE Europe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard FTSE Europe and Vanguard Communication 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 Communication Services are associated (or correlated) with Vanguard FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard FTSE Europe has no effect on the direction of Vanguard Communication i.e., Vanguard Communication and Vanguard FTSE go up and down completely randomly.

Pair Corralation between Vanguard Communication and Vanguard FTSE

Considering the 90-day investment horizon Vanguard Communication Services is expected to generate 1.16 times more return on investment than Vanguard FTSE. However, Vanguard Communication is 1.16 times more volatile than Vanguard FTSE Europe. It trades about 0.24 of its potential returns per unit of risk. Vanguard FTSE Europe is currently generating about 0.07 per unit of risk. 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 Communication Service  vs.  Vanguard FTSE Europe

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.

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 current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Vanguard Communication and Vanguard FTSE

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

The idea behind Vanguard Communication Services and Vanguard FTSE Europe 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.

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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.