Correlation Between Small Cap and Vanguard Short-term
Can any of the company-specific risk be diversified away by investing in both Small Cap and Vanguard Short-term 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 Short-term into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Stock and Vanguard Short Term Bond, you can compare the effects of market volatilities on Small Cap and Vanguard Short-term 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 Short-term. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Vanguard Short-term.
Diversification Opportunities for Small Cap and Vanguard Short-term
-0.49 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Small and Vanguard is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Stock and Vanguard Short Term Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Short Term 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 Stock are associated (or correlated) with Vanguard Short-term. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Short Term has no effect on the direction of Small Cap i.e., Small Cap and Vanguard Short-term go up and down completely randomly.
Pair Corralation between Small Cap and Vanguard Short-term
Assuming the 90 days horizon Small Cap Stock is expected to generate 8.83 times more return on investment than Vanguard Short-term. However, Small Cap is 8.83 times more volatile than Vanguard Short Term Bond. It trades about 0.09 of its potential returns per unit of risk. Vanguard Short Term Bond is currently generating about -0.01 per unit of risk. If you would invest 1,412 in Small Cap Stock on August 28, 2024 and sell it today you would earn a total of 101.00 from holding Small Cap Stock or generate 7.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Stock vs. Vanguard Short Term Bond
Performance |
| Timeline |
| Small Cap Stock |
| Vanguard Short Term |
Small Cap and Vanguard Short-term Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Vanguard Short-term
The main advantage of trading using opposite Small Cap and Vanguard Short-term positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap position performs unexpectedly, Vanguard Short-term 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 Short-term will offset losses from the drop in Vanguard Short-term's long position.| Small Cap vs. Nasdaq 100 2x Strategy | Small Cap vs. Eagle Mlp Strategy | Small Cap vs. Investec Emerging Markets | Small Cap vs. Dws Emerging Markets |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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