Correlation Between Extended Market and Vanguard Mid
Can any of the company-specific risk be diversified away by investing in both Extended Market and Vanguard Mid 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 Extended Market and Vanguard Mid into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Extended Market Index and Vanguard Mid Cap Index, you can compare the effects of market volatilities on Extended Market and Vanguard Mid 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 Extended Market with a short position of Vanguard Mid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Extended Market and Vanguard Mid.
Diversification Opportunities for Extended Market and Vanguard Mid
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Extended and Vanguard is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Extended Market Index and Vanguard Mid Cap Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Mid Cap and Extended Market 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 Extended Market Index are associated (or correlated) with Vanguard Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Mid Cap has no effect on the direction of Extended Market i.e., Extended Market and Vanguard Mid go up and down completely randomly.
Pair Corralation between Extended Market and Vanguard Mid
Assuming the 90 days horizon Extended Market Index is expected to generate 1.35 times more return on investment than Vanguard Mid. However, Extended Market is 1.35 times more volatile than Vanguard Mid Cap Index. It trades about 0.05 of its potential returns per unit of risk. Vanguard Mid Cap Index is currently generating about 0.05 per unit of risk. If you would invest 2,458 in Extended Market Index on September 13, 2024 and sell it today you would earn a total of 22.00 from holding Extended Market Index or generate 0.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Extended Market Index vs. Vanguard Mid Cap Index
Performance |
| Timeline |
| Extended Market Index |
| Vanguard Mid Cap |
Extended Market and Vanguard Mid Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Extended Market and Vanguard Mid
The main advantage of trading using opposite Extended Market and Vanguard Mid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Extended Market position performs unexpectedly, Vanguard Mid 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 Mid will offset losses from the drop in Vanguard Mid's long position.| Extended Market vs. Multimedia Portfolio Multimedia | Extended Market vs. Artisan Select Equity | Extended Market vs. Touchstone International Equity | Extended Market vs. Qs Global Equity |
| Vanguard Mid vs. Vanguard Small Cap Index | Vanguard Mid vs. Vanguard 500 Index | Vanguard Mid vs. Vanguard Growth Index | Vanguard Mid 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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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