Correlation Between Vanguard Small and Multimanager Lifestyle
Can any of the company-specific risk be diversified away by investing in both Vanguard Small and Multimanager Lifestyle 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 Multimanager Lifestyle 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 Multimanager Lifestyle Moderate, you can compare the effects of market volatilities on Vanguard Small and Multimanager Lifestyle 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 Multimanager Lifestyle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small and Multimanager Lifestyle.
Diversification Opportunities for Vanguard Small and Multimanager Lifestyle
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Vanguard and Multimanager is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Value and Multimanager Lifestyle Moderat in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multimanager Lifestyle 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 Multimanager Lifestyle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Multimanager Lifestyle has no effect on the direction of Vanguard Small i.e., Vanguard Small and Multimanager Lifestyle go up and down completely randomly.
Pair Corralation between Vanguard Small and Multimanager Lifestyle
Assuming the 90 days horizon Vanguard Small Cap Value is expected to generate 2.91 times more return on investment than Multimanager Lifestyle. However, Vanguard Small is 2.91 times more volatile than Multimanager Lifestyle Moderate. It trades about 0.08 of its potential returns per unit of risk. Multimanager Lifestyle Moderate is currently generating about 0.1 per unit of risk. If you would invest 4,444 in Vanguard Small Cap Value on November 7, 2024 and sell it today you would earn a total of 447.00 from holding Vanguard Small Cap Value or generate 10.06% 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. Multimanager Lifestyle Moderat
Performance |
| Timeline |
| Vanguard Small Cap |
| Multimanager Lifestyle |
Vanguard Small and Multimanager Lifestyle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Small and Multimanager Lifestyle
The main advantage of trading using opposite Vanguard Small and Multimanager Lifestyle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Small position performs unexpectedly, Multimanager Lifestyle 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 Multimanager Lifestyle will offset losses from the drop in Multimanager Lifestyle's long position.| Vanguard Small vs. Oakmark Fund Investor | Vanguard Small vs. Tiaa Cref Large Cap Value | Vanguard Small vs. Fidelity Large Cap | Vanguard Small vs. Transamerica Large 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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