Correlation Between Vanguard Small and Blue Chip
Can any of the company-specific risk be diversified away by investing in both Vanguard Small and Blue Chip 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 Blue Chip 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 Blue Chip Growth, you can compare the effects of market volatilities on Vanguard Small and Blue Chip 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 Blue Chip. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small and Blue Chip.
Diversification Opportunities for Vanguard Small and Blue Chip
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vanguard and Blue is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Value and Blue Chip Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blue Chip Growth 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 Blue Chip. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blue Chip Growth has no effect on the direction of Vanguard Small i.e., Vanguard Small and Blue Chip go up and down completely randomly.
Pair Corralation between Vanguard Small and Blue Chip
Assuming the 90 days horizon Vanguard Small Cap Value is expected to under-perform the Blue Chip. But the mutual fund apears to be less risky and, when comparing its historical volatility, Vanguard Small Cap Value is 1.19 times less risky than Blue Chip. The mutual fund trades about -0.03 of its potential returns per unit of risk. The Blue Chip Growth is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 1,990 in Blue Chip Growth on September 13, 2024 and sell it today you would earn a total of 64.00 from holding Blue Chip Growth or generate 3.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Small Cap Value vs. Blue Chip Growth
Performance |
| Timeline |
| Vanguard Small Cap |
| Blue Chip Growth |
Vanguard Small and Blue Chip Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Small and Blue Chip
The main advantage of trading using opposite Vanguard Small and Blue Chip positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Small position performs unexpectedly, Blue Chip 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 Blue Chip will offset losses from the drop in Blue Chip's long position.| Vanguard Small vs. Sentinel Small Pany | Vanguard Small vs. Pimco Diversified Income | Vanguard Small vs. Lord Abbett Diversified | Vanguard Small vs. Huber Capital Diversified |
| Blue Chip vs. Mid Cap Index | Blue Chip vs. Mid Cap Strategic | Blue Chip vs. Valic Company I | Blue Chip vs. Small Cap Special |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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