Correlation Between Vanguard Small and Vanguard FTSE
Can any of the company-specific risk be diversified away by investing in both Vanguard Small and Vanguard FTSE 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 Vanguard FTSE 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 Vanguard FTSE All World, you can compare the effects of market volatilities on Vanguard Small and Vanguard FTSE 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 Vanguard FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small and Vanguard FTSE.
Diversification Opportunities for Vanguard Small and Vanguard FTSE
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Vanguard and Vanguard is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Index and Vanguard FTSE All World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard FTSE All 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 Vanguard FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard FTSE All has no effect on the direction of Vanguard Small i.e., Vanguard Small and Vanguard FTSE go up and down completely randomly.
Pair Corralation between Vanguard Small and Vanguard FTSE
Allowing for the 90-day total investment horizon Vanguard Small Cap Index is expected to generate 1.37 times more return on investment than Vanguard FTSE. However, Vanguard Small is 1.37 times more volatile than Vanguard FTSE All World. It trades about 0.07 of its potential returns per unit of risk. Vanguard FTSE All World is currently generating about 0.05 per unit of risk. If you would invest 18,255 in Vanguard Small Cap Index on August 27, 2024 and sell it today you would earn a total of 7,518 from holding Vanguard Small Cap Index or generate 41.18% 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. Vanguard FTSE All World
Performance |
| Timeline |
| Vanguard Small Cap |
| Vanguard FTSE All |
Vanguard Small and Vanguard FTSE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Small and Vanguard FTSE
The main advantage of trading using opposite Vanguard Small and Vanguard FTSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Small position performs unexpectedly, Vanguard FTSE 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 FTSE will offset losses from the drop in Vanguard FTSE'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 |
| Vanguard FTSE vs. Vanguard FTSE Emerging | Vanguard FTSE vs. Vanguard Small Cap Index | Vanguard FTSE vs. Vanguard Total Bond | Vanguard FTSE vs. Vanguard FTSE All World |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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