Correlation Between Vanguard Small-cap and Vaughan Nelson
Can any of the company-specific risk be diversified away by investing in both Vanguard Small-cap and Vaughan Nelson 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 Vaughan Nelson 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 Vaughan Nelson Select, you can compare the effects of market volatilities on Vanguard Small-cap and Vaughan Nelson 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 Vaughan Nelson. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small-cap and Vaughan Nelson.
Diversification Opportunities for Vanguard Small-cap and Vaughan Nelson
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vanguard and Vaughan is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Value and Vaughan Nelson Select in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vaughan Nelson Select 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 Vaughan Nelson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vaughan Nelson Select has no effect on the direction of Vanguard Small-cap i.e., Vanguard Small-cap and Vaughan Nelson go up and down completely randomly.
Pair Corralation between Vanguard Small-cap and Vaughan Nelson
Assuming the 90 days horizon Vanguard Small Cap Value is expected to under-perform the Vaughan Nelson. But the mutual fund apears to be less risky and, when comparing its historical volatility, Vanguard Small Cap Value is 1.15 times less risky than Vaughan Nelson. The mutual fund trades about -0.31 of its potential returns per unit of risk. The Vaughan Nelson Select is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest 1,996 in Vaughan Nelson Select on October 10, 2024 and sell it today you would lose (44.00) from holding Vaughan Nelson Select or give up 2.2% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Small Cap Value vs. Vaughan Nelson Select
Performance |
| Timeline |
| Vanguard Small Cap |
| Vaughan Nelson Select |
Vanguard Small-cap and Vaughan Nelson Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Small-cap and Vaughan Nelson
The main advantage of trading using opposite Vanguard Small-cap and Vaughan Nelson positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Small-cap position performs unexpectedly, Vaughan Nelson 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 Vaughan Nelson will offset losses from the drop in Vaughan Nelson's long position.| Vanguard Small-cap vs. Lord Abbett Diversified | Vanguard Small-cap vs. Saat Market Growth | Vanguard Small-cap vs. Oshaughnessy Market Leaders | Vanguard Small-cap vs. Alphacentric Hedged Market |
| Vaughan Nelson vs. Lord Abbett Small | Vaughan Nelson vs. Vanguard Small Cap Value | Vaughan Nelson vs. Lsv Small Cap | Vaughan Nelson vs. William Blair Small |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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