Correlation Between Vanguard Small-cap and Timothy Small-cap
Can any of the company-specific risk be diversified away by investing in both Vanguard Small-cap and Timothy 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 Vanguard Small-cap and Timothy Small-cap 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 Timothy Small Cap Value, you can compare the effects of market volatilities on Vanguard Small-cap and Timothy 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 Vanguard Small-cap with a short position of Timothy Small-cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small-cap and Timothy Small-cap.
Diversification Opportunities for Vanguard Small-cap and Timothy Small-cap
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vanguard and Timothy is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Index and Timothy Small Cap Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Timothy Small Cap 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 Timothy 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 Timothy Small Cap has no effect on the direction of Vanguard Small-cap i.e., Vanguard Small-cap and Timothy Small-cap go up and down completely randomly.
Pair Corralation between Vanguard Small-cap and Timothy Small-cap
Assuming the 90 days horizon Vanguard Small-cap is expected to generate 1.27 times less return on investment than Timothy Small-cap. But when comparing it to its historical volatility, Vanguard Small Cap Index is 1.23 times less risky than Timothy Small-cap. It trades about 0.18 of its potential returns per unit of risk. Timothy Small Cap Value is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 1,887 in Timothy Small Cap Value on October 21, 2024 and sell it today you would earn a total of 66.00 from holding Timothy Small Cap Value or generate 3.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Small Cap Index vs. Timothy Small Cap Value
Performance |
| Timeline |
| Vanguard Small Cap |
| Timothy Small Cap |
Vanguard Small-cap and Timothy Small-cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Small-cap and Timothy Small-cap
The main advantage of trading using opposite Vanguard Small-cap and Timothy Small-cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Small-cap position performs unexpectedly, Timothy 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 Timothy Small-cap will offset losses from the drop in Timothy Small-cap'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 |
| Timothy Small-cap vs. Timothy Largemid Cap Value | Timothy Small-cap vs. Timothy Plan Large | Timothy Small-cap vs. Timothy Aggressive Growth | Timothy Small-cap vs. Timothy Plan International |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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