Correlation Between Vanguard 500 and Jacob Small
Can any of the company-specific risk be diversified away by investing in both Vanguard 500 and Jacob 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 Jacob 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 Jacob Small Cap, you can compare the effects of market volatilities on Vanguard 500 and Jacob 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 Jacob Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard 500 and Jacob Small.
Diversification Opportunities for Vanguard 500 and Jacob Small
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between VANGUARD and Jacob is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard 500 Index and Jacob Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jacob 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 Jacob Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jacob Small Cap has no effect on the direction of Vanguard 500 i.e., Vanguard 500 and Jacob Small go up and down completely randomly.
Pair Corralation between Vanguard 500 and Jacob Small
Assuming the 90 days horizon Vanguard 500 Index is expected to generate 0.41 times more return on investment than Jacob Small. However, Vanguard 500 Index is 2.45 times less risky than Jacob Small. It trades about 0.12 of its potential returns per unit of risk. Jacob Small Cap is currently generating about 0.04 per unit of risk. If you would invest 40,946 in Vanguard 500 Index on August 26, 2024 and sell it today you would earn a total of 14,045 from holding Vanguard 500 Index or generate 34.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard 500 Index vs. Jacob Small Cap
Performance |
| Timeline |
| Vanguard 500 Index |
| Jacob Small Cap |
Vanguard 500 and Jacob Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard 500 and Jacob Small
The main advantage of trading using opposite Vanguard 500 and Jacob Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard 500 position performs unexpectedly, Jacob 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 Jacob Small will offset losses from the drop in Jacob Small's long position.| Vanguard 500 vs. Vanguard Total Stock | Vanguard 500 vs. Vanguard Mid Cap Index | Vanguard 500 vs. Vanguard Small Cap Index | Vanguard 500 vs. Vanguard Total Bond |
| Jacob Small vs. Jacob Micro Cap | Jacob Small vs. Jacob Internet Fund | Jacob Small vs. Jacob Forward ETF | Jacob Small vs. Oberweis Small Cap Opportunities |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
Other Complementary Tools
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios |