Correlation Between Timothy Small-cap and Vanguard Small-cap
Can any of the company-specific risk be diversified away by investing in both Timothy Small-cap 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 Timothy Small-cap 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 Timothy Small Cap Value and Vanguard Small Cap Index, you can compare the effects of market volatilities on Timothy Small-cap 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 Timothy Small-cap with a short position of Vanguard Small-cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Timothy Small-cap and Vanguard Small-cap.
Diversification Opportunities for Timothy Small-cap and Vanguard Small-cap
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Timothy and Vanguard is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Timothy Small Cap Value 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 Timothy 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 Timothy Small Cap Value 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 Timothy Small-cap i.e., Timothy Small-cap and Vanguard Small-cap go up and down completely randomly.
Pair Corralation between Timothy Small-cap and Vanguard Small-cap
Assuming the 90 days horizon Timothy Small-cap is expected to generate 1.21 times less return on investment than Vanguard Small-cap. In addition to that, Timothy Small-cap is 1.09 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 0.07 per unit of volatility. If you would invest 8,823 in Vanguard Small Cap Index on September 2, 2024 and sell it today you would earn a total of 3,651 from holding Vanguard Small Cap Index or generate 41.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Timothy Small Cap Value vs. Vanguard Small Cap Index
Performance |
| Timeline |
| Timothy Small Cap |
| Vanguard Small Cap |
Timothy Small-cap and Vanguard Small-cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Timothy Small-cap and Vanguard Small-cap
The main advantage of trading using opposite Timothy Small-cap and Vanguard Small-cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Timothy Small-cap 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.| Timothy Small-cap vs. Timothy Largemid Cap Value | Timothy Small-cap vs. Timothy Plan Large | Timothy Small-cap vs. Timothy Aggressive Growth | Timothy Small-cap vs. Timothy Plan International |
| Vanguard Small-cap vs. Vanguard Strategic Small Cap | Vanguard Small-cap vs. Vanguard Emerging Markets | Vanguard Small-cap vs. Vanguard Diversified Equity | Vanguard Small-cap vs. Vanguard Mid Cap |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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