Correlation Between Vanguard Growth and Vanguard Small
Can any of the company-specific risk be diversified away by investing in both Vanguard Growth and Vanguard 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 Growth and Vanguard Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Growth Index and Vanguard Small Cap Value, you can compare the effects of market volatilities on Vanguard Growth and Vanguard 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 Growth with a short position of Vanguard Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Growth and Vanguard Small.
Diversification Opportunities for Vanguard Growth and Vanguard Small
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vanguard and Vanguard is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Growth Index and Vanguard Small Cap Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Small Cap and Vanguard Growth 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 Growth Index are associated (or correlated) with Vanguard Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Small Cap has no effect on the direction of Vanguard Growth i.e., Vanguard Growth and Vanguard Small go up and down completely randomly.
Pair Corralation between Vanguard Growth and Vanguard Small
Assuming the 90 days horizon Vanguard Growth Index is expected to generate 1.0 times more return on investment than Vanguard Small. However, Vanguard Growth Index is 1.0 times less risky than Vanguard Small. It trades about 0.11 of its potential returns per unit of risk. Vanguard Small Cap Value is currently generating about 0.09 per unit of risk. If you would invest 13,781 in Vanguard Growth Index on August 31, 2024 and sell it today you would earn a total of 7,270 from holding Vanguard Growth Index or generate 52.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.73% |
| Values | Daily Returns |
Vanguard Growth Index vs. Vanguard Small Cap Value
Performance |
| Timeline |
| Vanguard Growth Index |
| Vanguard Small Cap |
Vanguard Growth and Vanguard Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Growth and Vanguard Small
The main advantage of trading using opposite Vanguard Growth and Vanguard Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Growth position performs unexpectedly, Vanguard 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 Vanguard Small will offset losses from the drop in Vanguard Small's long position.| Vanguard Growth vs. Vanguard Value Index | Vanguard Growth vs. Vanguard Mid Cap Index | Vanguard Growth vs. Vanguard Small Cap Growth | Vanguard Growth vs. Vanguard 500 Index |
| Vanguard Small vs. Vanguard Mid Cap Value | Vanguard Small vs. Vanguard Value Index | Vanguard Small vs. Vanguard Small Cap Growth | Vanguard Small vs. Vanguard Emerging Markets |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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