Correlation Between Balanced Strategy and Vanguard Small-cap
Can any of the company-specific risk be diversified away by investing in both Balanced Strategy 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 Balanced Strategy 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 Balanced Strategy Fund and Vanguard Small Cap Value, you can compare the effects of market volatilities on Balanced Strategy 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 Balanced Strategy with a short position of Vanguard Small-cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Balanced Strategy and Vanguard Small-cap.
Diversification Opportunities for Balanced Strategy and Vanguard Small-cap
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Balanced and Vanguard is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Balanced Strategy Fund 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 Balanced Strategy 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 Balanced Strategy 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 Balanced Strategy i.e., Balanced Strategy and Vanguard Small-cap go up and down completely randomly.
Pair Corralation between Balanced Strategy and Vanguard Small-cap
Assuming the 90 days horizon Balanced Strategy is expected to generate 1.66 times less return on investment than Vanguard Small-cap. But when comparing it to its historical volatility, Balanced Strategy Fund is 2.11 times less risky than Vanguard Small-cap. It trades about 0.13 of its potential returns per unit of risk. Vanguard Small Cap Value is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 4,012 in Vanguard Small Cap Value on August 29, 2024 and sell it today you would earn a total of 1,167 from holding Vanguard Small Cap Value or generate 29.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Balanced Strategy Fund vs. Vanguard Small Cap Value
Performance |
| Timeline |
| Balanced Strategy |
| Vanguard Small Cap |
Balanced Strategy and Vanguard Small-cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Balanced Strategy and Vanguard Small-cap
The main advantage of trading using opposite Balanced Strategy and Vanguard Small-cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Balanced Strategy 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.| Balanced Strategy vs. Gmo Global Equity | Balanced Strategy vs. Artisan Select Equity | Balanced Strategy vs. Balanced Fund Retail | Balanced Strategy vs. Touchstone International Equity |
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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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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