Correlation Between Applied Finance and Vanguard Small
Can any of the company-specific risk be diversified away by investing in both Applied Finance and Vanguard Small 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 Applied Finance and Vanguard Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Applied Finance Explorer and Vanguard Small Cap Value, you can compare the effects of market volatilities on Applied Finance and Vanguard Small 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 Applied Finance with a short position of Vanguard Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Finance and Vanguard Small.
Diversification Opportunities for Applied Finance and Vanguard Small
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Applied and Vanguard is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Applied Finance Explorer and Vanguard Small Cap Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Small Cap and Applied Finance 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 Applied Finance Explorer are associated (or correlated) with Vanguard Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Small Cap has no effect on the direction of Applied Finance i.e., Applied Finance and Vanguard Small go up and down completely randomly.
Pair Corralation between Applied Finance and Vanguard Small
Assuming the 90 days horizon Applied Finance Explorer is expected to generate 1.7 times more return on investment than Vanguard Small. However, Applied Finance is 1.7 times more volatile than Vanguard Small Cap Value. It trades about 0.07 of its potential returns per unit of risk. Vanguard Small Cap Value is currently generating about 0.11 per unit of risk. If you would invest 1,876 in Applied Finance Explorer on September 2, 2024 and sell it today you would earn a total of 552.00 from holding Applied Finance Explorer or generate 29.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Applied Finance Explorer vs. Vanguard Small Cap Value
Performance |
| Timeline |
| Applied Finance Explorer |
| Vanguard Small Cap |
Applied Finance and Vanguard Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Applied Finance and Vanguard Small
The main advantage of trading using opposite Applied Finance and Vanguard Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Finance position performs unexpectedly, Vanguard Small 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 Small will offset losses from the drop in Vanguard Small's long position.| Applied Finance vs. Thrivent Small Cap | Applied Finance vs. Applied Finance Select | Applied Finance vs. Parnassus Endeavor Fund | Applied Finance vs. Queens Road Small |
| Vanguard Small vs. Tax Managed Mid Small | Vanguard Small vs. Delaware Limited Term Diversified | Vanguard Small vs. American Century Diversified | Vanguard Small vs. Lord Abbett Diversified |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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