Correlation Between Small Cap and Vanguard Wellesley
Can any of the company-specific risk be diversified away by investing in both Small Cap and Vanguard Wellesley 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 Cap and Vanguard Wellesley into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Core and Vanguard Wellesley Income, you can compare the effects of market volatilities on Small Cap and Vanguard Wellesley 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 Cap with a short position of Vanguard Wellesley. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Vanguard Wellesley.
Diversification Opportunities for Small Cap and Vanguard Wellesley
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Small and Vanguard is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Core and Vanguard Wellesley Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Wellesley Income and Small Cap 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 Cap Core are associated (or correlated) with Vanguard Wellesley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Wellesley Income has no effect on the direction of Small Cap i.e., Small Cap and Vanguard Wellesley go up and down completely randomly.
Pair Corralation between Small Cap and Vanguard Wellesley
Assuming the 90 days horizon Small Cap Core is expected to generate 3.76 times more return on investment than Vanguard Wellesley. However, Small Cap is 3.76 times more volatile than Vanguard Wellesley Income. It trades about 0.06 of its potential returns per unit of risk. Vanguard Wellesley Income is currently generating about 0.13 per unit of risk. If you would invest 1,293 in Small Cap Core on August 27, 2024 and sell it today you would earn a total of 193.00 from holding Small Cap Core or generate 14.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Core vs. Vanguard Wellesley Income
Performance |
| Timeline |
| Small Cap Core |
| Vanguard Wellesley Income |
Small Cap and Vanguard Wellesley Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Vanguard Wellesley
The main advantage of trading using opposite Small Cap and Vanguard Wellesley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap position performs unexpectedly, Vanguard Wellesley 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 Wellesley will offset losses from the drop in Vanguard Wellesley's long position.| Small Cap vs. Pace High Yield | Small Cap vs. Needham Aggressive Growth | Small Cap vs. Metropolitan West High | Small Cap vs. Pioneer High Income |
| Vanguard Wellesley vs. Vanguard Wellington Fund | Vanguard Wellesley vs. Vanguard Balanced Index | Vanguard Wellesley vs. Vanguard Dividend Growth | Vanguard Wellesley vs. Vanguard Health Care |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
Other Complementary Tools
| Share Portfolio Track or share privately all of your investments from the convenience of any device | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| Companies Directory Evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets |