Correlation Between Small Midcap and Vanguard Small
Can any of the company-specific risk be diversified away by investing in both Small Midcap and Vanguard Small 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 Small Midcap and Vanguard Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Midcap Dividend Income and Vanguard Small Cap Growth, you can compare the effects of market volatilities on Small Midcap and Vanguard Small 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 Small Midcap with a short position of Vanguard Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Midcap and Vanguard Small.
Diversification Opportunities for Small Midcap and Vanguard Small
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Small and Vanguard is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Small Midcap Dividend Income and Vanguard Small Cap Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Small Cap and Small Midcap 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 Small Midcap Dividend Income are associated (or correlated) with Vanguard Small. 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 Small Midcap i.e., Small Midcap and Vanguard Small go up and down completely randomly.
Pair Corralation between Small Midcap and Vanguard Small
Assuming the 90 days horizon Small Midcap is expected to generate 1.23 times less return on investment than Vanguard Small. But when comparing it to its historical volatility, Small Midcap Dividend Income is 1.19 times less risky than Vanguard Small. It trades about 0.08 of its potential returns per unit of risk. Vanguard Small Cap Growth is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 6,186 in Vanguard Small Cap Growth on September 12, 2024 and sell it today you would earn a total of 2,135 from holding Vanguard Small Cap Growth or generate 34.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Midcap Dividend Income vs. Vanguard Small Cap Growth
Performance |
| Timeline |
| Small Midcap Dividend |
| Vanguard Small Cap |
Small Midcap and Vanguard Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Midcap and Vanguard Small
The main advantage of trading using opposite Small Midcap and Vanguard Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Midcap position performs unexpectedly, Vanguard Small 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 will offset losses from the drop in Vanguard Small's long position.| Small Midcap vs. Fidelity Advisor Energy | Small Midcap vs. Energy Basic Materials | Small Midcap vs. Thrivent Natural Resources | Small Midcap vs. Firsthand Alternative Energy |
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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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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