Correlation Between Midcap Sp and Vanguard Extended
Can any of the company-specific risk be diversified away by investing in both Midcap Sp and Vanguard Extended 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 Midcap Sp and Vanguard Extended into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Midcap Sp 400 and Vanguard Extended Market, you can compare the effects of market volatilities on Midcap Sp and Vanguard Extended 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 Midcap Sp with a short position of Vanguard Extended. Check out your portfolio center. Please also check ongoing floating volatility patterns of Midcap Sp and Vanguard Extended.
Diversification Opportunities for Midcap Sp and Vanguard Extended
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Midcap and Vanguard is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Midcap Sp 400 and Vanguard Extended Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Extended Market and Midcap Sp 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 Midcap Sp 400 are associated (or correlated) with Vanguard Extended. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Extended Market has no effect on the direction of Midcap Sp i.e., Midcap Sp and Vanguard Extended go up and down completely randomly.
Pair Corralation between Midcap Sp and Vanguard Extended
Assuming the 90 days horizon Midcap Sp is expected to generate 1.35 times less return on investment than Vanguard Extended. But when comparing it to its historical volatility, Midcap Sp 400 is 1.13 times less risky than Vanguard Extended. It trades about 0.33 of its potential returns per unit of risk. Vanguard Extended Market is currently generating about 0.4 of returns per unit of risk over similar time horizon. If you would invest 13,959 in Vanguard Extended Market on September 3, 2024 and sell it today you would earn a total of 1,588 from holding Vanguard Extended Market or generate 11.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Midcap Sp 400 vs. Vanguard Extended Market
Performance |
| Timeline |
| Midcap Sp 400 |
| Vanguard Extended Market |
Midcap Sp and Vanguard Extended Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Midcap Sp and Vanguard Extended
The main advantage of trading using opposite Midcap Sp and Vanguard Extended positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Midcap Sp position performs unexpectedly, Vanguard Extended 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 Extended will offset losses from the drop in Vanguard Extended's long position.| Midcap Sp vs. Vanguard Mid Cap Index | Midcap Sp vs. Vanguard Mid Cap Index | Midcap Sp vs. Vanguard Mid Cap Index | Midcap Sp vs. Vanguard Mid Cap Index |
| Vanguard Extended vs. Vanguard Total International | Vanguard Extended vs. Vanguard Total Bond | Vanguard Extended vs. Vanguard Institutional Index | Vanguard Extended vs. Vanguard Institutional 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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