Correlation Between Vanguard Small-cap and American Funds
Can any of the company-specific risk be diversified away by investing in both Vanguard Small-cap and American Funds 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 American Funds 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 American Funds Washington, you can compare the effects of market volatilities on Vanguard Small-cap and American Funds 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 American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small-cap and American Funds.
Diversification Opportunities for Vanguard Small-cap and American Funds
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Vanguard and American is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Value and American Funds Washington in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds Washington 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 Value are associated (or correlated) with American Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Funds Washington has no effect on the direction of Vanguard Small-cap i.e., Vanguard Small-cap and American Funds go up and down completely randomly.
Pair Corralation between Vanguard Small-cap and American Funds
Assuming the 90 days horizon Vanguard Small Cap Value is expected to generate 1.59 times more return on investment than American Funds. However, Vanguard Small-cap is 1.59 times more volatile than American Funds Washington. It trades about 0.11 of its potential returns per unit of risk. American Funds Washington is currently generating about 0.15 per unit of risk. If you would invest 3,877 in Vanguard Small Cap Value on August 26, 2024 and sell it today you would earn a total of 1,253 from holding Vanguard Small Cap Value or generate 32.32% 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. American Funds Washington
Performance |
| Timeline |
| Vanguard Small Cap |
| American Funds Washington |
Vanguard Small-cap and American Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Small-cap and American Funds
The main advantage of trading using opposite Vanguard Small-cap and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Small-cap position performs unexpectedly, American Funds 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 American Funds will offset losses from the drop in American Funds' long position.| Vanguard Small-cap vs. Vanguard Mid Cap Value | Vanguard Small-cap vs. Vanguard Value Index | Vanguard Small-cap vs. Vanguard Small Cap Growth | Vanguard Small-cap vs. Vanguard Emerging Markets |
| American Funds vs. American Century Etf | American Funds vs. Vanguard Small Cap Value | American Funds vs. Mid Cap Value Profund | American Funds vs. Hennessy Nerstone Mid |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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