Correlation Between Vanguard Small and ZSPY
Can any of the company-specific risk be diversified away by investing in both Vanguard Small and ZSPY 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 ZSPY 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 ZSPY, you can compare the effects of market volatilities on Vanguard Small and ZSPY 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 ZSPY. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small and ZSPY.
Diversification Opportunities for Vanguard Small and ZSPY
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Vanguard and ZSPY is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Index and ZSPY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZSPY 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 ZSPY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZSPY has no effect on the direction of Vanguard Small i.e., Vanguard Small and ZSPY go up and down completely randomly.
Pair Corralation between Vanguard Small and ZSPY
If you would invest 25,625 in Vanguard Small Cap Index on September 12, 2024 and sell it today you would earn a total of 8.00 from holding Vanguard Small Cap Index or generate 0.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 9.09% |
| Values | Daily Returns |
Vanguard Small Cap Index vs. ZSPY
Performance |
| Timeline |
| Vanguard Small Cap |
| ZSPY |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Vanguard Small and ZSPY Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Small and ZSPY
The main advantage of trading using opposite Vanguard Small and ZSPY positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Small position performs unexpectedly, ZSPY 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 ZSPY will offset losses from the drop in ZSPY'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 |
| ZSPY vs. Vanguard Total Stock | ZSPY vs. SPDR SP 500 | ZSPY vs. iShares Core SP | ZSPY vs. Vanguard Total Bond |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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