Correlation Between Vanguard Small-cap and Steward Small-mid
Can any of the company-specific risk be diversified away by investing in both Vanguard Small-cap and Steward Small-mid 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 Vanguard Small-cap and Steward Small-mid into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Small Cap Index and Steward Small Mid Cap, you can compare the effects of market volatilities on Vanguard Small-cap and Steward Small-mid 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 Vanguard Small-cap with a short position of Steward Small-mid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small-cap and Steward Small-mid.
Diversification Opportunities for Vanguard Small-cap and Steward Small-mid
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Vanguard and Steward is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Index and Steward Small Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steward Small Mid and Vanguard 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 Vanguard Small Cap Index are associated (or correlated) with Steward Small-mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Steward Small Mid has no effect on the direction of Vanguard Small-cap i.e., Vanguard Small-cap and Steward Small-mid go up and down completely randomly.
Pair Corralation between Vanguard Small-cap and Steward Small-mid
Assuming the 90 days horizon Vanguard Small Cap Index is expected to generate 1.0 times more return on investment than Steward Small-mid. However, Vanguard Small Cap Index is 1.0 times less risky than Steward Small-mid. It trades about 0.09 of its potential returns per unit of risk. Steward Small Mid Cap is currently generating about 0.07 per unit of risk. If you would invest 10,127 in Vanguard Small Cap Index on August 25, 2024 and sell it today you would earn a total of 2,216 from holding Vanguard Small Cap Index or generate 21.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Small Cap Index vs. Steward Small Mid Cap
Performance |
| Timeline |
| Vanguard Small Cap |
| Steward Small Mid |
Vanguard Small-cap and Steward Small-mid Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Small-cap and Steward Small-mid
The main advantage of trading using opposite Vanguard Small-cap and Steward Small-mid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Small-cap position performs unexpectedly, Steward Small-mid 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 Steward Small-mid will offset losses from the drop in Steward Small-mid's long position.| Vanguard Small-cap vs. Vanguard Mid Cap Index | Vanguard Small-cap vs. Vanguard Reit Index | Vanguard Small-cap vs. Vanguard Value Index | Vanguard Small-cap vs. Vanguard Small Cap Value |
| Steward Small-mid vs. Alger Health Sciences | Steward Small-mid vs. Deutsche Health And | Steward Small-mid vs. Alphacentric Lifesci Healthcare | Steward Small-mid vs. Prudential Health Sciences |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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