Correlation Between Vanguard Small-cap and Gmo Emerging
Can any of the company-specific risk be diversified away by investing in both Vanguard Small-cap and Gmo Emerging 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 Gmo Emerging 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 Gmo Emerging Markets, you can compare the effects of market volatilities on Vanguard Small-cap and Gmo Emerging 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 Gmo Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small-cap and Gmo Emerging.
Diversification Opportunities for Vanguard Small-cap and Gmo Emerging
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between Vanguard and Gmo is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Value and Gmo Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gmo Emerging Markets 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 Gmo Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gmo Emerging Markets has no effect on the direction of Vanguard Small-cap i.e., Vanguard Small-cap and Gmo Emerging go up and down completely randomly.
Pair Corralation between Vanguard Small-cap and Gmo Emerging
Assuming the 90 days horizon Vanguard Small Cap Value is expected to generate 1.68 times more return on investment than Gmo Emerging. However, Vanguard Small-cap is 1.68 times more volatile than Gmo Emerging Markets. It trades about 0.25 of its potential returns per unit of risk. Gmo Emerging Markets is currently generating about -0.21 per unit of risk. If you would invest 4,825 in Vanguard Small Cap Value on August 29, 2024 and sell it today you would earn a total of 354.00 from holding Vanguard Small Cap Value or generate 7.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Small Cap Value vs. Gmo Emerging Markets
Performance |
| Timeline |
| Vanguard Small Cap |
| Gmo Emerging Markets |
Vanguard Small-cap and Gmo Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Small-cap and Gmo Emerging
The main advantage of trading using opposite Vanguard Small-cap and Gmo Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Small-cap position performs unexpectedly, Gmo Emerging 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 Gmo Emerging will offset losses from the drop in Gmo Emerging's long position.| Vanguard Small-cap vs. Qs Growth Fund | Vanguard Small-cap vs. Shelton Funds | Vanguard Small-cap vs. T Rowe Price | Vanguard Small-cap vs. T Rowe Price |
| Gmo Emerging vs. Mutual Of America | Gmo Emerging vs. Lord Abbett Small | Gmo Emerging vs. Vanguard Small Cap Value | Gmo Emerging vs. Ultramid Cap Profund Ultramid Cap |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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