Correlation Between Vanguard Small and Vanguard Total
Can any of the company-specific risk be diversified away by investing in both Vanguard Small and Vanguard Total 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 Vanguard Total 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 Vanguard Total Stock, you can compare the effects of market volatilities on Vanguard Small and Vanguard Total 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 Vanguard Total. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small and Vanguard Total.
Diversification Opportunities for Vanguard Small and Vanguard Total
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Vanguard and Vanguard is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Value and Vanguard Total Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Total Stock 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 Vanguard Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Total Stock has no effect on the direction of Vanguard Small i.e., Vanguard Small and Vanguard Total go up and down completely randomly.
Pair Corralation between Vanguard Small and Vanguard Total
Assuming the 90 days horizon Vanguard Small Cap Value is expected to under-perform the Vanguard Total. In addition to that, Vanguard Small is 1.3 times more volatile than Vanguard Total Stock. It trades about -0.01 of its total potential returns per unit of risk. Vanguard Total Stock is currently generating about 0.08 per unit of volatility. If you would invest 13,784 in Vanguard Total Stock on September 30, 2024 and sell it today you would earn a total of 521.00 from holding Vanguard Total Stock or generate 3.78% 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. Vanguard Total Stock
Performance |
| Timeline |
| Vanguard Small Cap |
| Vanguard Total Stock |
Vanguard Small and Vanguard Total Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Small and Vanguard Total
The main advantage of trading using opposite Vanguard Small and Vanguard Total positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Small position performs unexpectedly, Vanguard Total 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 Vanguard Total will offset losses from the drop in Vanguard Total's long position.| Vanguard Small vs. College Retirement Equities | Vanguard Small vs. Fidelity Managed Retirement | Vanguard Small vs. Dimensional Retirement Income | Vanguard Small vs. Franklin Lifesmart Retirement |
| Vanguard Total vs. Vanguard International Growth | Vanguard Total vs. Vanguard Wellington Fund | Vanguard Total vs. Vanguard Windsor Ii |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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