Correlation Between Vanguard Small-cap and Kensington Dynamic
Can any of the company-specific risk be diversified away by investing in both Vanguard Small-cap and Kensington Dynamic 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 Small-cap and Kensington Dynamic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Small Cap Growth and Kensington Dynamic Growth, you can compare the effects of market volatilities on Vanguard Small-cap and Kensington Dynamic 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 Small-cap with a short position of Kensington Dynamic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small-cap and Kensington Dynamic.
Diversification Opportunities for Vanguard Small-cap and Kensington Dynamic
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Vanguard and Kensington is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Growth and Kensington Dynamic Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kensington Dynamic Growth and Vanguard Small-cap 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 Small Cap Growth are associated (or correlated) with Kensington Dynamic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kensington Dynamic Growth has no effect on the direction of Vanguard Small-cap i.e., Vanguard Small-cap and Kensington Dynamic go up and down completely randomly.
Pair Corralation between Vanguard Small-cap and Kensington Dynamic
Assuming the 90 days horizon Vanguard Small Cap Growth is expected to under-perform the Kensington Dynamic. In addition to that, Vanguard Small-cap is 38.31 times more volatile than Kensington Dynamic Growth. It trades about -0.25 of its total potential returns per unit of risk. Kensington Dynamic Growth is currently generating about 0.32 per unit of volatility. If you would invest 1,078 in Kensington Dynamic Growth on November 29, 2024 and sell it today you would earn a total of 2.00 from holding Kensington Dynamic Growth or generate 0.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Small Cap Growth vs. Kensington Dynamic Growth
Performance |
| Timeline |
| Vanguard Small Cap |
| Kensington Dynamic Growth |
Vanguard Small-cap and Kensington Dynamic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Small-cap and Kensington Dynamic
The main advantage of trading using opposite Vanguard Small-cap and Kensington Dynamic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Small-cap position performs unexpectedly, Kensington Dynamic 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 Kensington Dynamic will offset losses from the drop in Kensington Dynamic's long position.| Vanguard Small-cap vs. Mainstay High Yield | Vanguard Small-cap vs. Jpmorgan High Yield | Vanguard Small-cap vs. Payden High Income | Vanguard Small-cap vs. Virtus High Yield |
| Kensington Dynamic vs. Lord Abbett Diversified | Kensington Dynamic vs. Diversified Real Asset | Kensington Dynamic vs. Fulcrum Diversified Absolute | Kensington Dynamic vs. Blackrock Diversified Fixed |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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