Correlation Between Mid Cap and Vanguard Small-cap
Can any of the company-specific risk be diversified away by investing in both Mid Cap 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 Mid Cap 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 Mid Cap Growth Profund and Vanguard Small Cap Value, you can compare the effects of market volatilities on Mid Cap 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 Mid Cap with a short position of Vanguard Small-cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mid Cap and Vanguard Small-cap.
Diversification Opportunities for Mid Cap and Vanguard Small-cap
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Mid and Vanguard is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Mid Cap Growth Profund 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 Mid 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 Mid Cap Growth Profund 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 Mid Cap i.e., Mid Cap and Vanguard Small-cap go up and down completely randomly.
Pair Corralation between Mid Cap and Vanguard Small-cap
Assuming the 90 days horizon Mid Cap Growth Profund is expected to under-perform the Vanguard Small-cap. In addition to that, Mid Cap is 1.18 times more volatile than Vanguard Small Cap Value. It trades about -0.26 of its total potential returns per unit of risk. Vanguard Small Cap Value is currently generating about -0.25 per unit of volatility. If you would invest 4,940 in Vanguard Small Cap Value on November 27, 2024 and sell it today you would lose (207.00) from holding Vanguard Small Cap Value or give up 4.19% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mid Cap Growth Profund vs. Vanguard Small Cap Value
Performance |
| Timeline |
| Mid Cap Growth |
| Vanguard Small Cap |
Mid Cap and Vanguard Small-cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mid Cap and Vanguard Small-cap
The main advantage of trading using opposite Mid Cap and Vanguard Small-cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mid Cap 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.| Mid Cap vs. Small Cap Growth Profund | Mid Cap vs. Mid Cap Value Profund | Mid Cap vs. Small Cap Value Profund | Mid Cap vs. Mid Cap Profund Mid Cap |
| Vanguard Small-cap vs. Mondrian Emerging Markets | Vanguard Small-cap vs. Angel Oak Multi Strategy | Vanguard Small-cap vs. Pnc Emerging Markets | Vanguard Small-cap vs. Siit Emerging Markets |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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