Correlation Between Vanguard Long and Small Cap
Can any of the company-specific risk be diversified away by investing in both Vanguard Long and Small Cap 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 Long and Small Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Long Term Bond and Small Cap Stock, you can compare the effects of market volatilities on Vanguard Long and Small Cap 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 Long with a short position of Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Long and Small Cap.
Diversification Opportunities for Vanguard Long and Small Cap
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Vanguard and Small is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Long Term Bond and Small Cap Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Stock and Vanguard Long 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 Long Term Bond are associated (or correlated) with Small Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Stock has no effect on the direction of Vanguard Long i.e., Vanguard Long and Small Cap go up and down completely randomly.
Pair Corralation between Vanguard Long and Small Cap
Assuming the 90 days horizon Vanguard Long is expected to generate 4.75 times less return on investment than Small Cap. But when comparing it to its historical volatility, Vanguard Long Term Bond is 1.47 times less risky than Small Cap. It trades about 0.02 of its potential returns per unit of risk. Small Cap Stock is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,127 in Small Cap Stock on September 13, 2024 and sell it today you would earn a total of 370.00 from holding Small Cap Stock or generate 32.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Long Term Bond vs. Small Cap Stock
Performance |
| Timeline |
| Vanguard Long Term |
| Small Cap Stock |
Vanguard Long and Small Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Long and Small Cap
The main advantage of trading using opposite Vanguard Long and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Long position performs unexpectedly, Small Cap 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 Small Cap will offset losses from the drop in Small Cap's long position.| Vanguard Long vs. Vanguard Materials Index | Vanguard Long vs. Vanguard Limited Term Tax Exempt | Vanguard Long vs. Vanguard Limited Term Tax Exempt | Vanguard Long vs. Vanguard Global Minimum |
| Small Cap vs. Goldman Sachs Real | Small Cap vs. Fidelity Real Estate | Small Cap vs. Redwood Real Estate | Small Cap vs. Vy Clarion Real |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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