Correlation Between Vanguard Energy and Small Cap
Can any of the company-specific risk be diversified away by investing in both Vanguard Energy 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 Energy 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 Energy Index and Small Cap Equity, you can compare the effects of market volatilities on Vanguard Energy 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 Energy with a short position of Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Energy and Small Cap.
Diversification Opportunities for Vanguard Energy and Small Cap
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vanguard and Small is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Energy Index and Small Cap Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Equity and Vanguard Energy 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 Energy Index 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 Equity has no effect on the direction of Vanguard Energy i.e., Vanguard Energy and Small Cap go up and down completely randomly.
Pair Corralation between Vanguard Energy and Small Cap
Assuming the 90 days horizon Vanguard Energy is expected to generate 13.91 times less return on investment than Small Cap. In addition to that, Vanguard Energy is 1.2 times more volatile than Small Cap Equity. It trades about 0.01 of its total potential returns per unit of risk. Small Cap Equity is currently generating about 0.2 per unit of volatility. If you would invest 1,807 in Small Cap Equity on November 7, 2024 and sell it today you would earn a total of 67.00 from holding Small Cap Equity or generate 3.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Energy Index vs. Small Cap Equity
Performance |
| Timeline |
| Vanguard Energy Index |
| Small Cap Equity |
Vanguard Energy and Small Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Energy and Small Cap
The main advantage of trading using opposite Vanguard Energy and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Energy 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 Energy vs. Vanguard Financials Index | Vanguard Energy vs. Vanguard Utilities Index | Vanguard Energy vs. Vanguard Materials Index | Vanguard Energy vs. Vanguard Sumer Staples |
| Small Cap vs. Firsthand Technology Opportunities | Small Cap vs. Specialized Technology Fund | Small Cap vs. Columbia Global Technology | Small Cap vs. Science Technology Fund |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
Other Complementary Tools
| Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules | |
| Transaction History View history of all your transactions and understand their impact on performance | |
| Global Markets Map Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes | |
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk |