Correlation Between Vanguard Small and Xtrackers Russell
Can any of the company-specific risk be diversified away by investing in both Vanguard Small and Xtrackers Russell 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 Vanguard Small and Xtrackers Russell into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Small Cap Index and Xtrackers Russell Multifactor, you can compare the effects of market volatilities on Vanguard Small and Xtrackers Russell 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 Vanguard Small with a short position of Xtrackers Russell. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small and Xtrackers Russell.
Diversification Opportunities for Vanguard Small and Xtrackers Russell
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Vanguard and Xtrackers is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Index and Xtrackers Russell Multifactor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers Russell and Vanguard Small 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 Vanguard Small Cap Index are associated (or correlated) with Xtrackers Russell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers Russell has no effect on the direction of Vanguard Small i.e., Vanguard Small and Xtrackers Russell go up and down completely randomly.
Pair Corralation between Vanguard Small and Xtrackers Russell
Allowing for the 90-day total investment horizon Vanguard Small Cap Index is expected to generate 1.41 times more return on investment than Xtrackers Russell. However, Vanguard Small is 1.41 times more volatile than Xtrackers Russell Multifactor. It trades about 0.4 of its potential returns per unit of risk. Xtrackers Russell Multifactor is currently generating about 0.38 per unit of risk. If you would invest 23,564 in Vanguard Small Cap Index on September 1, 2024 and sell it today you would earn a total of 2,487 from holding Vanguard Small Cap Index or generate 10.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Vanguard Small Cap Index vs. Xtrackers Russell Multifactor
Performance |
| Timeline |
| Vanguard Small Cap |
| Xtrackers Russell |
Vanguard Small and Xtrackers Russell Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Small and Xtrackers Russell
The main advantage of trading using opposite Vanguard Small and Xtrackers Russell positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Small position performs unexpectedly, Xtrackers Russell 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 Xtrackers Russell will offset losses from the drop in Xtrackers Russell's long position.| Vanguard Small vs. Vanguard Mid Cap Index | Vanguard Small vs. Vanguard Small Cap Value | Vanguard Small vs. Vanguard FTSE Emerging | Vanguard Small vs. Vanguard Large Cap Index |
| Xtrackers Russell vs. Xtrackers FTSE Developed | Xtrackers Russell vs. John Hancock Multifactor | Xtrackers Russell vs. Xtrackers MSCI All | Xtrackers Russell vs. Xtrackers MSCI Eurozone |
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.
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