Correlation Between Vanguard 500 and Vela Small
Can any of the company-specific risk be diversified away by investing in both Vanguard 500 and Vela Small 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 500 and Vela Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard 500 Index and Vela Small Cap, you can compare the effects of market volatilities on Vanguard 500 and Vela Small 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 500 with a short position of Vela Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard 500 and Vela Small.
Diversification Opportunities for Vanguard 500 and Vela Small
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Vanguard and Vela is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard 500 Index and Vela Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vela Small Cap and Vanguard 500 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 500 Index are associated (or correlated) with Vela Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vela Small Cap has no effect on the direction of Vanguard 500 i.e., Vanguard 500 and Vela Small go up and down completely randomly.
Pair Corralation between Vanguard 500 and Vela Small
Assuming the 90 days horizon Vanguard 500 Index is expected to generate 0.89 times more return on investment than Vela Small. However, Vanguard 500 Index is 1.13 times less risky than Vela Small. It trades about 0.13 of its potential returns per unit of risk. Vela Small Cap is currently generating about 0.08 per unit of risk. If you would invest 20,607 in Vanguard 500 Index on August 31, 2024 and sell it today you would earn a total of 8,965 from holding Vanguard 500 Index or generate 43.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.73% |
| Values | Daily Returns |
Vanguard 500 Index vs. Vela Small Cap
Performance |
| Timeline |
| Vanguard 500 Index |
| Vela Small Cap |
Vanguard 500 and Vela Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard 500 and Vela Small
The main advantage of trading using opposite Vanguard 500 and Vela Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard 500 position performs unexpectedly, Vela Small 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 Vela Small will offset losses from the drop in Vela Small's long position.| Vanguard 500 vs. Vanguard Materials Index | Vanguard 500 vs. Vanguard Limited Term Tax Exempt | Vanguard 500 vs. Vanguard Limited Term Tax Exempt | Vanguard 500 vs. Vanguard Global Minimum |
| Vela Small vs. Victory Rs Partners | Vela Small vs. Mid Cap Value Profund | Vela Small vs. Columbia Small Cap | Vela Small vs. Fidelity Small Cap |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
Other Complementary Tools
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
| Content Syndication Quickly integrate customizable finance content to your own investment portal | |
| Earnings Calls Check upcoming earnings announcements updated hourly across public exchanges |