Correlation Between Vanguard Small and VanEck International
Can any of the company-specific risk be diversified away by investing in both Vanguard Small and VanEck International 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 VanEck International 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 VanEck International High, you can compare the effects of market volatilities on Vanguard Small and VanEck International 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 VanEck International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small and VanEck International.
Diversification Opportunities for Vanguard Small and VanEck International
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Vanguard and VanEck is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Index and VanEck International High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck International High 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 VanEck International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck International High has no effect on the direction of Vanguard Small i.e., Vanguard Small and VanEck International go up and down completely randomly.
Pair Corralation between Vanguard Small and VanEck International
Allowing for the 90-day total investment horizon Vanguard Small Cap Index is expected to generate 3.63 times more return on investment than VanEck International. However, Vanguard Small is 3.63 times more volatile than VanEck International High. It trades about 0.22 of its potential returns per unit of risk. VanEck International High is currently generating about -0.22 per unit of risk. If you would invest 23,434 in Vanguard Small Cap Index on August 26, 2024 and sell it today you would earn a total of 2,339 from holding Vanguard Small Cap Index or generate 9.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Small Cap Index vs. VanEck International High
Performance |
| Timeline |
| Vanguard Small Cap |
| VanEck International High |
Vanguard Small and VanEck International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Small and VanEck International
The main advantage of trading using opposite Vanguard Small and VanEck International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Small position performs unexpectedly, VanEck International 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 VanEck International will offset losses from the drop in VanEck International'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 |
| VanEck International vs. VanEck Emerging Markets | VanEck International vs. iShares International High | VanEck International vs. iShares Intl High | VanEck International vs. iShares JP Morgan |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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