Correlation Between Growth Income and Vanguard Small-cap
Can any of the company-specific risk be diversified away by investing in both Growth Income 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 Growth Income 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 Growth Income Fund and Vanguard Small Cap Index, you can compare the effects of market volatilities on Growth Income 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 Growth Income with a short position of Vanguard Small-cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Growth Income and Vanguard Small-cap.
Diversification Opportunities for Growth Income and Vanguard Small-cap
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Growth and Vanguard is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Growth Income 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 Growth Income 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 Growth Income 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 Growth Income i.e., Growth Income and Vanguard Small-cap go up and down completely randomly.
Pair Corralation between Growth Income and Vanguard Small-cap
Assuming the 90 days horizon Growth Income is expected to generate 1.95 times less return on investment than Vanguard Small-cap. But when comparing it to its historical volatility, Growth Income Fund is 1.53 times less risky than Vanguard Small-cap. It trades about 0.17 of its potential returns per unit of risk. Vanguard Small Cap Index is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 11,341 in Vanguard Small Cap Index on August 24, 2024 and sell it today you would earn a total of 625.00 from holding Vanguard Small Cap Index or generate 5.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
Growth Income Fund vs. Vanguard Small Cap Index
Performance |
| Timeline |
| Growth Income |
| Vanguard Small Cap |
Growth Income and Vanguard Small-cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Growth Income and Vanguard Small-cap
The main advantage of trading using opposite Growth Income and Vanguard Small-cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Growth Income 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.| Growth Income vs. American Funds Conservative | Growth Income vs. Evaluator Conservative Rms | Growth Income vs. Massmutual Premier Diversified | Growth Income vs. Western Asset Diversified |
| Vanguard Small-cap vs. Vanguard Mid Cap Index | Vanguard Small-cap vs. Vanguard Total Bond | Vanguard Small-cap vs. Vanguard Institutional Index | Vanguard Small-cap vs. Vanguard Total International |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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