Correlation Between Thrivent High and Vanguard Small-cap
Can any of the company-specific risk be diversified away by investing in both Thrivent High and Vanguard Small-cap 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 Thrivent High and Vanguard Small-cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Thrivent High Yield and Vanguard Small Cap Index, you can compare the effects of market volatilities on Thrivent High and Vanguard Small-cap 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 Thrivent High with a short position of Vanguard Small-cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Thrivent High and Vanguard Small-cap.
Diversification Opportunities for Thrivent High and Vanguard Small-cap
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Thrivent and Vanguard is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Thrivent High Yield and Vanguard Small Cap Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Small Cap and Thrivent High 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 Thrivent High Yield are associated (or correlated) with Vanguard Small-cap. 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 Thrivent High i.e., Thrivent High and Vanguard Small-cap go up and down completely randomly.
Pair Corralation between Thrivent High and Vanguard Small-cap
Assuming the 90 days horizon Thrivent High is expected to generate 13.94 times less return on investment than Vanguard Small-cap. But when comparing it to its historical volatility, Thrivent High Yield is 7.88 times less risky than Vanguard Small-cap. It trades about 0.22 of its potential returns per unit of risk. Vanguard Small Cap Index is currently generating about 0.39 of returns per unit of risk over similar time horizon. If you would invest 11,289 in Vanguard Small Cap Index on September 1, 2024 and sell it today you would earn a total of 1,153 from holding Vanguard Small Cap Index or generate 10.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Thrivent High Yield vs. Vanguard Small Cap Index
Performance |
| Timeline |
| Thrivent High Yield |
| Vanguard Small Cap |
Thrivent High and Vanguard Small-cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Thrivent High and Vanguard Small-cap
The main advantage of trading using opposite Thrivent High and Vanguard Small-cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Thrivent High position performs unexpectedly, Vanguard Small-cap 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-cap will offset losses from the drop in Vanguard Small-cap's long position.| Thrivent High vs. Thrivent Limited Maturity | Thrivent High vs. Thrivent Large Cap | Thrivent High vs. Thrivent Large Cap | Thrivent High vs. Thrivent Opportunity Income |
| Vanguard Small-cap vs. Vanguard Mid Cap Index | Vanguard Small-cap vs. Vanguard 500 Index | Vanguard Small-cap vs. Vanguard Emerging Markets | Vanguard Small-cap vs. Vanguard Reit Index |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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