Correlation Between Brandes Small and Vanguard Small
Can any of the company-specific risk be diversified away by investing in both Brandes Small 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 Brandes Small and Vanguard Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Brandes Small Cap and Vanguard Small Cap Value, you can compare the effects of market volatilities on Brandes Small 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 Brandes Small with a short position of Vanguard Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brandes Small and Vanguard Small.
Diversification Opportunities for Brandes Small and Vanguard Small
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Brandes and Vanguard is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Brandes Small Cap 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 Brandes Small 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 Brandes Small Cap 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 Brandes Small i.e., Brandes Small and Vanguard Small go up and down completely randomly.
Pair Corralation between Brandes Small and Vanguard Small
Assuming the 90 days horizon Brandes Small Cap is expected to generate 0.98 times more return on investment than Vanguard Small. However, Brandes Small Cap is 1.02 times less risky than Vanguard Small. It trades about 0.09 of its potential returns per unit of risk. Vanguard Small Cap Value is currently generating about 0.09 per unit of risk. If you would invest 1,296 in Brandes Small Cap on September 2, 2024 and sell it today you would earn a total of 499.00 from holding Brandes Small Cap or generate 38.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Brandes Small Cap vs. Vanguard Small Cap Value
Performance |
| Timeline |
| Brandes Small Cap |
| Vanguard Small Cap |
Brandes Small and Vanguard Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Brandes Small and Vanguard Small
The main advantage of trading using opposite Brandes Small and Vanguard Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brandes Small 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.| Brandes Small vs. Brandes Small Cap | Brandes Small vs. Brandes E Plus | Brandes Small vs. Brandes E Plus | Brandes Small vs. Brandes E Plus |
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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 Global Correlations module to find global opportunities by holding instruments from different markets.
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