Correlation Between Vanguard and 2023 EFT
Can any of the company-specific risk be diversified away by investing in both Vanguard and 2023 EFT 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 and 2023 EFT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard SP Small Cap and 2023 EFT Series, you can compare the effects of market volatilities on Vanguard and 2023 EFT 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 with a short position of 2023 EFT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard and 2023 EFT.
Diversification Opportunities for Vanguard and 2023 EFT
Very poor diversification
The 3 months correlation between Vanguard and 2023 is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard SP Small Cap and 2023 EFT Series in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 2023 EFT Series and Vanguard 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 SP Small Cap are associated (or correlated) with 2023 EFT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 2023 EFT Series has no effect on the direction of Vanguard i.e., Vanguard and 2023 EFT go up and down completely randomly.
Pair Corralation between Vanguard and 2023 EFT
Given the investment horizon of 90 days Vanguard SP Small Cap is expected to generate 1.5 times more return on investment than 2023 EFT. However, Vanguard is 1.5 times more volatile than 2023 EFT Series. It trades about 0.1 of its potential returns per unit of risk. 2023 EFT Series is currently generating about 0.09 per unit of risk. If you would invest 8,527 in Vanguard SP Small Cap on September 1, 2024 and sell it today you would earn a total of 1,560 from holding Vanguard SP Small Cap or generate 18.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.21% |
| Values | Daily Returns |
Vanguard SP Small Cap vs. 2023 EFT Series
Performance |
| Timeline |
| Vanguard SP Small |
| 2023 EFT Series |
Vanguard and 2023 EFT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard and 2023 EFT
The main advantage of trading using opposite Vanguard and 2023 EFT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard position performs unexpectedly, 2023 EFT 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 2023 EFT will offset losses from the drop in 2023 EFT's long position.| Vanguard vs. Vanguard Small Cap Value | Vanguard vs. Dimensional Targeted Value | Vanguard vs. SPDR SP 600 | Vanguard vs. Avantis Small Cap |
| 2023 EFT vs. Vanguard Small Cap Value | 2023 EFT vs. Dimensional Targeted Value | 2023 EFT vs. SPDR SP 600 | 2023 EFT vs. Avantis 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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