Correlation Between Total Return and Vanguard Small
Can any of the company-specific risk be diversified away by investing in both Total Return 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 Total Return and Vanguard Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Total Return Fund and Vanguard Small Cap Index, you can compare the effects of market volatilities on Total Return 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 Total Return with a short position of Vanguard Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Total Return and Vanguard Small.
Diversification Opportunities for Total Return and Vanguard Small
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Total and Vanguard is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Total Return Fund and Vanguard Small Cap Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Small Cap and Total Return 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 Total Return Fund 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 Total Return i.e., Total Return and Vanguard Small go up and down completely randomly.
Pair Corralation between Total Return and Vanguard Small
Assuming the 90 days horizon Total Return is expected to generate 4.99 times less return on investment than Vanguard Small. But when comparing it to its historical volatility, Total Return Fund is 3.51 times less risky than Vanguard Small. It trades about 0.09 of its potential returns per unit of risk. Vanguard Small Cap Index is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 10,505 in Vanguard Small Cap Index on September 1, 2024 and sell it today you would earn a total of 1,969 from holding Vanguard Small Cap Index or generate 18.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Total Return Fund vs. Vanguard Small Cap Index
Performance |
| Timeline |
| Total Return |
| Vanguard Small Cap |
Total Return and Vanguard Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Total Return and Vanguard Small
The main advantage of trading using opposite Total Return and Vanguard Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Total Return 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.| Total Return vs. Vanguard Institutional Index | Total Return vs. Dodge Stock Fund | Total Return vs. Europacific Growth Fund | Total Return vs. Real Return Fund |
| Vanguard Small vs. Vanguard Mid Cap Index | Vanguard Small vs. Vanguard Total Bond | Vanguard Small vs. Vanguard Institutional Index | Vanguard Small vs. Vanguard Total 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
Other Complementary Tools
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum | |
| Portfolio Anywhere Track or share privately all of your investments from the convenience of any device | |
| Equity Analysis Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities | |
| Top Crypto Exchanges Search and analyze digital assets across top global cryptocurrency exchanges | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account |