Correlation Between Utilities Fund and Vanguard Small-cap
Can any of the company-specific risk be diversified away by investing in both Utilities Fund 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 Utilities Fund 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 Utilities Fund Class and Vanguard Small Cap Value, you can compare the effects of market volatilities on Utilities Fund 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 Utilities Fund with a short position of Vanguard Small-cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Utilities Fund and Vanguard Small-cap.
Diversification Opportunities for Utilities Fund and Vanguard Small-cap
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Utilities and Vanguard is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Utilities Fund Class 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 Utilities Fund 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 Utilities Fund Class 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 Utilities Fund i.e., Utilities Fund and Vanguard Small-cap go up and down completely randomly.
Pair Corralation between Utilities Fund and Vanguard Small-cap
Assuming the 90 days horizon Utilities Fund Class is expected to generate 1.13 times more return on investment than Vanguard Small-cap. However, Utilities Fund is 1.13 times more volatile than Vanguard Small Cap Value. It trades about 0.24 of its potential returns per unit of risk. Vanguard Small Cap Value is currently generating about 0.26 per unit of risk. If you would invest 4,778 in Utilities Fund Class on October 20, 2024 and sell it today you would earn a total of 211.00 from holding Utilities Fund Class or generate 4.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Utilities Fund Class vs. Vanguard Small Cap Value
Performance |
| Timeline |
| Utilities Fund Class |
| Vanguard Small Cap |
Utilities Fund and Vanguard Small-cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Utilities Fund and Vanguard Small-cap
The main advantage of trading using opposite Utilities Fund and Vanguard Small-cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Utilities Fund 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.| Utilities Fund vs. Allianzgi Diversified Income | Utilities Fund vs. Wilmington Diversified Income | Utilities Fund vs. Small Cap Stock | Utilities Fund vs. Stone Ridge Diversified |
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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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