Correlation Between Vanguard Small-cap and High Income
Can any of the company-specific risk be diversified away by investing in both Vanguard Small-cap and High Income 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 High Income 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 High Income Fund, you can compare the effects of market volatilities on Vanguard Small-cap and High Income 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 High Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small-cap and High Income.
Diversification Opportunities for Vanguard Small-cap and High Income
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between VANGUARD and High is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Growth and High Income Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on High Income Fund 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 High Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of High Income Fund has no effect on the direction of Vanguard Small-cap i.e., Vanguard Small-cap and High Income go up and down completely randomly.
Pair Corralation between Vanguard Small-cap and High Income
Assuming the 90 days horizon Vanguard Small Cap Growth is expected to generate 7.15 times more return on investment than High Income. However, Vanguard Small-cap is 7.15 times more volatile than High Income Fund. It trades about 0.47 of its potential returns per unit of risk. High Income Fund is currently generating about 0.11 per unit of risk. If you would invest 7,501 in Vanguard Small Cap Growth on September 1, 2024 and sell it today you would earn a total of 966.00 from holding Vanguard Small Cap Growth or generate 12.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Vanguard Small Cap Growth vs. High Income Fund
Performance |
| Timeline |
| Vanguard Small Cap |
| High Income Fund |
Vanguard Small-cap and High Income Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Small-cap and High Income
The main advantage of trading using opposite Vanguard Small-cap and High Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Small-cap position performs unexpectedly, High Income 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 High Income will offset losses from the drop in High Income's long position.| Vanguard Small-cap vs. Multisector Bond Sma | Vanguard Small-cap vs. Nuveen Arizona Municipal | Vanguard Small-cap vs. Maryland Tax Free Bond | Vanguard Small-cap vs. T Rowe Price |
| High Income vs. Vanguard Small Cap Growth | High Income vs. Nasdaq 100 Index Fund | High Income vs. Growth Opportunities Fund | High Income vs. Commonwealth Global Fund |
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 Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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