Correlation Between Vanguard Extended and Walden Midcap
Can any of the company-specific risk be diversified away by investing in both Vanguard Extended and Walden Midcap 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 Extended and Walden Midcap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Extended Market and Walden Midcap Fund, you can compare the effects of market volatilities on Vanguard Extended and Walden Midcap 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 Extended with a short position of Walden Midcap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Extended and Walden Midcap.
Diversification Opportunities for Vanguard Extended and Walden Midcap
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vanguard and Walden is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Extended Market and Walden Midcap Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walden Midcap and Vanguard Extended 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 Extended Market are associated (or correlated) with Walden Midcap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walden Midcap has no effect on the direction of Vanguard Extended i.e., Vanguard Extended and Walden Midcap go up and down completely randomly.
Pair Corralation between Vanguard Extended and Walden Midcap
Assuming the 90 days horizon Vanguard Extended Market is expected to generate 1.41 times more return on investment than Walden Midcap. However, Vanguard Extended is 1.41 times more volatile than Walden Midcap Fund. It trades about 0.06 of its potential returns per unit of risk. Walden Midcap Fund is currently generating about 0.04 per unit of risk. If you would invest 9,913 in Vanguard Extended Market on December 12, 2024 and sell it today you would earn a total of 3,214 from holding Vanguard Extended Market or generate 32.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Vanguard Extended Market vs. Walden Midcap Fund
Performance |
| Timeline |
| Vanguard Extended Market |
| Walden Midcap |
Vanguard Extended and Walden Midcap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Extended and Walden Midcap
The main advantage of trading using opposite Vanguard Extended and Walden Midcap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Extended position performs unexpectedly, Walden Midcap 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 Walden Midcap will offset losses from the drop in Walden Midcap's long position.| Vanguard Extended vs. Vanguard Materials Index | ||
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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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