Correlation Between Vanguard Health and Small Cap
Can any of the company-specific risk be diversified away by investing in both Vanguard Health 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 Health 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 Health Care and Small Cap Stock, you can compare the effects of market volatilities on Vanguard Health 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 Health with a short position of Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Health and Small Cap.
Diversification Opportunities for Vanguard Health and Small Cap
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between VANGUARD and Small is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Health Care 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 Health 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 Health Care 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 Health i.e., Vanguard Health and Small Cap go up and down completely randomly.
Pair Corralation between Vanguard Health and Small Cap
Assuming the 90 days horizon Vanguard Health Care is expected to generate 0.92 times more return on investment than Small Cap. However, Vanguard Health Care is 1.08 times less risky than Small Cap. It trades about 0.36 of its potential returns per unit of risk. Small Cap Stock is currently generating about 0.16 per unit of risk. If you would invest 12,705 in Vanguard Health Care on November 3, 2024 and sell it today you would earn a total of 843.00 from holding Vanguard Health Care or generate 6.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Health Care vs. Small Cap Stock
Performance |
| Timeline |
| Vanguard Health Care |
| Small Cap Stock |
Vanguard Health and Small Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Health and Small Cap
The main advantage of trading using opposite Vanguard Health and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Health 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 Health vs. Vanguard Information Technology | Vanguard Health vs. Vanguard Sumer Staples | Vanguard Health vs. Vanguard Sumer Discretionary | Vanguard Health vs. Vanguard Financials Index |
| Small Cap vs. Commonwealth Global Fund | Small Cap vs. Rbb Fund | Small Cap vs. Scharf Global Opportunity | Small Cap vs. Dws Global Macro |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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