Correlation Between Vanguard Small and Small-cap Value
Can any of the company-specific risk be diversified away by investing in both Vanguard Small and Small-cap Value 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 and Small-cap Value into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Small Cap Value and Small Cap Value Fund, you can compare the effects of market volatilities on Vanguard Small and Small-cap Value 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 with a short position of Small-cap Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small and Small-cap Value.
Diversification Opportunities for Vanguard Small and Small-cap Value
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Vanguard and Small-cap is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Value and Small Cap Value Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Value and Vanguard Small 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 Value are associated (or correlated) with Small-cap Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Value has no effect on the direction of Vanguard Small i.e., Vanguard Small and Small-cap Value go up and down completely randomly.
Pair Corralation between Vanguard Small and Small-cap Value
Assuming the 90 days horizon Vanguard Small Cap Value is expected to generate 0.75 times more return on investment than Small-cap Value. However, Vanguard Small Cap Value is 1.34 times less risky than Small-cap Value. It trades about 0.07 of its potential returns per unit of risk. Small Cap Value Fund is currently generating about 0.02 per unit of risk. If you would invest 4,133 in Vanguard Small Cap Value on November 3, 2024 and sell it today you would earn a total of 792.00 from holding Vanguard Small Cap Value or generate 19.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Small Cap Value vs. Small Cap Value Fund
Performance |
| Timeline |
| Vanguard Small Cap |
| Small Cap Value |
Vanguard Small and Small-cap Value Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Small and Small-cap Value
The main advantage of trading using opposite Vanguard Small and Small-cap Value positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Small position performs unexpectedly, Small-cap Value 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 Small-cap Value will offset losses from the drop in Small-cap Value's long position.| Vanguard Small vs. Lord Abbett Diversified | Vanguard Small vs. Aqr Diversified Arbitrage | Vanguard Small vs. Jpmorgan Diversified Fund | Vanguard Small vs. Wells Fargo Diversified |
| Small-cap Value vs. Commodities Strategy Fund | Small-cap Value vs. Rbc Emerging Markets | Small-cap Value vs. Artisan Developing World | Small-cap Value vs. Dodge Cox Emerging |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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