Correlation Between Paradigm Value and Vanguard Small-cap
Can any of the company-specific risk be diversified away by investing in both Paradigm Value 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 Paradigm Value 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 Paradigm Value Fund and Vanguard Small Cap Index, you can compare the effects of market volatilities on Paradigm Value 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 Paradigm Value with a short position of Vanguard Small-cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Paradigm Value and Vanguard Small-cap.
Diversification Opportunities for Paradigm Value and Vanguard Small-cap
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Paradigm and Vanguard is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Paradigm Value 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 Paradigm Value 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 Paradigm Value Fund 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 Paradigm Value i.e., Paradigm Value and Vanguard Small-cap go up and down completely randomly.
Pair Corralation between Paradigm Value and Vanguard Small-cap
Assuming the 90 days horizon Paradigm Value is expected to generate 1.59 times less return on investment than Vanguard Small-cap. In addition to that, Paradigm Value is 1.2 times more volatile than Vanguard Small Cap Index. It trades about 0.05 of its total potential returns per unit of risk. Vanguard Small Cap Index is currently generating about 0.09 per unit of volatility. If you would invest 10,443 in Vanguard Small Cap Index on September 1, 2024 and sell it today you would earn a total of 1,999 from holding Vanguard Small Cap Index or generate 19.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.47% |
| Values | Daily Returns |
Paradigm Value Fund vs. Vanguard Small Cap Index
Performance |
| Timeline |
| Paradigm Value |
| Vanguard Small Cap |
Paradigm Value and Vanguard Small-cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Paradigm Value and Vanguard Small-cap
The main advantage of trading using opposite Paradigm Value and Vanguard Small-cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Paradigm Value 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.| Paradigm Value vs. Royce Small Cap Value | Paradigm Value vs. Royce Smaller Companies Growth | Paradigm Value vs. Kinetics Paradigm Fund | Paradigm Value vs. Tcw Relative Value |
| Vanguard Small-cap vs. Vanguard Mid Cap Index | Vanguard Small-cap vs. Vanguard 500 Index | Vanguard Small-cap vs. Vanguard Emerging Markets | Vanguard Small-cap vs. Vanguard Reit Index |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
Other Complementary Tools
| Earnings Calls Check upcoming earnings announcements updated hourly across public exchanges | |
| Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. | |
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
| Content Syndication Quickly integrate customizable finance content to your own investment portal | |
| Stocks Directory Find actively traded stocks across global markets |