Correlation Between Vanguard Small-cap and Keeley Small

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Can any of the company-specific risk be diversified away by investing in both Vanguard Small-cap and Keeley Small 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 Keeley Small 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 Keeley Small Cap, you can compare the effects of market volatilities on Vanguard Small-cap and Keeley Small 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 Keeley Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small-cap and Keeley Small.

Diversification Opportunities for Vanguard Small-cap and Keeley Small

0.99
  Correlation Coefficient

No risk reduction

The 3 months correlation between Vanguard and Keeley is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Value and Keeley Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Keeley Small Cap 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 Keeley Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Keeley Small Cap has no effect on the direction of Vanguard Small-cap i.e., Vanguard Small-cap and Keeley Small go up and down completely randomly.

Pair Corralation between Vanguard Small-cap and Keeley Small

Assuming the 90 days horizon Vanguard Small-cap is expected to generate 1.17 times less return on investment than Keeley Small. But when comparing it to its historical volatility, Vanguard Small Cap Value is 1.1 times less risky than Keeley Small. It trades about 0.26 of its potential returns per unit of risk. Keeley Small Cap is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  1,840  in Keeley Small Cap on August 29, 2024 and sell it today you would earn a total of  159.00  from holding Keeley Small Cap or generate 8.64% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Vanguard Small Cap Value  vs.  Keeley Small Cap

 Performance 
       Timeline  
Vanguard Small Cap 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Small Cap Value are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Vanguard Small-cap may actually be approaching a critical reversion point that can send shares even higher in December 2024.
Keeley Small Cap 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Keeley Small Cap are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Keeley Small may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Vanguard Small-cap and Keeley Small Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Vanguard Small-cap and Keeley Small

The main advantage of trading using opposite Vanguard Small-cap and Keeley Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Small-cap position performs unexpectedly, Keeley Small 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 Keeley Small will offset losses from the drop in Keeley Small's long position.
The idea behind Vanguard Small Cap Value and Keeley Small Cap pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.

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