Correlation Between Small Cap and Vanguard Strategic
Can any of the company-specific risk be diversified away by investing in both Small Cap and Vanguard Strategic 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 Small Cap and Vanguard Strategic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Growth and Vanguard Strategic Small Cap, you can compare the effects of market volatilities on Small Cap and Vanguard Strategic 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 Small Cap with a short position of Vanguard Strategic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Vanguard Strategic.
Diversification Opportunities for Small Cap and Vanguard Strategic
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Small and Vanguard is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Growth and Vanguard Strategic Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Strategic and Small Cap 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 Small Cap Growth are associated (or correlated) with Vanguard Strategic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Strategic has no effect on the direction of Small Cap i.e., Small Cap and Vanguard Strategic go up and down completely randomly.
Pair Corralation between Small Cap and Vanguard Strategic
Assuming the 90 days horizon Small Cap Growth is expected to generate 0.86 times more return on investment than Vanguard Strategic. However, Small Cap Growth is 1.16 times less risky than Vanguard Strategic. It trades about 0.04 of its potential returns per unit of risk. Vanguard Strategic Small Cap is currently generating about 0.03 per unit of risk. If you would invest 1,544 in Small Cap Growth on November 27, 2024 and sell it today you would earn a total of 332.00 from holding Small Cap Growth or generate 21.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Growth vs. Vanguard Strategic Small Cap
Performance |
| Timeline |
| Small Cap Growth |
| Vanguard Strategic |
Small Cap and Vanguard Strategic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Vanguard Strategic
The main advantage of trading using opposite Small Cap and Vanguard Strategic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap position performs unexpectedly, Vanguard Strategic 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 Strategic will offset losses from the drop in Vanguard Strategic's long position.| Small Cap vs. Transamerica Funds | Small Cap vs. Pace Select Advisors | Small Cap vs. T Rowe Price | Small Cap vs. Wilmington Funds |
| Vanguard Strategic vs. Vanguard Explorer Value | Vanguard Strategic vs. Vanguard Strategic Equity | Vanguard Strategic vs. Vanguard Diversified Equity | Vanguard Strategic vs. Vanguard Mid Cap |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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