Correlation Between Northern Small and Vanguard Small-cap
Can any of the company-specific risk be diversified away by investing in both Northern Small 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 Northern Small 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 Northern Small Cap and Vanguard Small Cap Value, you can compare the effects of market volatilities on Northern Small 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 Northern Small with a short position of Vanguard Small-cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Small and Vanguard Small-cap.
Diversification Opportunities for Northern Small and Vanguard Small-cap
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Northern and Vanguard is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Northern Small Cap 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 Northern Small 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 Northern Small Cap 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 Northern Small i.e., Northern Small and Vanguard Small-cap go up and down completely randomly.
Pair Corralation between Northern Small and Vanguard Small-cap
Assuming the 90 days horizon Northern Small Cap is expected to generate 1.44 times more return on investment than Vanguard Small-cap. However, Northern Small is 1.44 times more volatile than Vanguard Small Cap Value. It trades about 0.19 of its potential returns per unit of risk. Vanguard Small Cap Value is currently generating about 0.25 per unit of risk. If you would invest 2,092 in Northern Small Cap on August 29, 2024 and sell it today you would earn a total of 157.00 from holding Northern Small Cap or generate 7.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Northern Small Cap vs. Vanguard Small Cap Value
Performance |
| Timeline |
| Northern Small Cap |
| Vanguard Small Cap |
Northern Small and Vanguard Small-cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Small and Vanguard Small-cap
The main advantage of trading using opposite Northern Small and Vanguard Small-cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Small 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.| Northern Small vs. Vanguard Small Cap Value | Northern Small vs. Vanguard Small Cap Value | Northern Small vs. Us Small Cap | Northern Small vs. Us Targeted Value |
| Vanguard Small-cap vs. Qs Growth Fund | Vanguard Small-cap vs. Shelton Funds | Vanguard Small-cap vs. T Rowe Price | Vanguard Small-cap vs. T Rowe Price |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
Other Complementary Tools
| Money Managers Screen money managers from public funds and ETFs managed around the world | |
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world | |
| Transaction History View history of all your transactions and understand their impact on performance | |
| Bonds Directory Find actively traded corporate debentures issued by US companies |