Correlation Between Vanguard and Pacer Small
Can any of the company-specific risk be diversified away by investing in both Vanguard and Pacer 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 and Pacer Small 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 Pacer Small Cap, you can compare the effects of market volatilities on Vanguard and Pacer 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 with a short position of Pacer Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard and Pacer Small.
Diversification Opportunities for Vanguard and Pacer Small
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Vanguard and Pacer is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard SP Small Cap and Pacer Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacer Small Cap 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 Pacer Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacer Small Cap has no effect on the direction of Vanguard i.e., Vanguard and Pacer Small go up and down completely randomly.
Pair Corralation between Vanguard and Pacer Small
Given the investment horizon of 90 days Vanguard SP Small Cap is expected to generate 1.0 times more return on investment than Pacer Small. However, Vanguard SP Small Cap is 1.0 times less risky than Pacer Small. It trades about 0.08 of its potential returns per unit of risk. Pacer Small Cap is currently generating about 0.03 per unit of risk. If you would invest 7,922 in Vanguard SP Small Cap on August 27, 2024 and sell it today you would earn a total of 2,027 from holding Vanguard SP Small Cap or generate 25.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard SP Small Cap vs. Pacer Small Cap
Performance |
| Timeline |
| Vanguard SP Small |
| Pacer Small Cap |
Vanguard and Pacer Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard and Pacer Small
The main advantage of trading using opposite Vanguard and Pacer Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard position performs unexpectedly, Pacer 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 Pacer Small will offset losses from the drop in Pacer Small's long position.| Vanguard vs. Vanguard SP Small Cap | Vanguard vs. Vanguard SP Small Cap | Vanguard vs. Vanguard SP Mid Cap | Vanguard vs. Vanguard Russell 2000 |
| Pacer Small vs. Pacer Cash Cows | Pacer Small vs. Pacer Global Cash | Pacer Small vs. Pacer Developed Markets | Pacer Small vs. Invesco SP SmallCap |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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