Correlation Between Vanguard Mid-cap and Vanguard Extended
Can any of the company-specific risk be diversified away by investing in both Vanguard Mid-cap and Vanguard Extended 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 Mid-cap and Vanguard Extended into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Mid Cap Index and Vanguard Extended Market, you can compare the effects of market volatilities on Vanguard Mid-cap and Vanguard Extended 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 Mid-cap with a short position of Vanguard Extended. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Mid-cap and Vanguard Extended.
Diversification Opportunities for Vanguard Mid-cap and Vanguard Extended
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vanguard and Vanguard is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Mid Cap Index and Vanguard Extended Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Extended Market and Vanguard Mid-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 Mid Cap Index are associated (or correlated) with Vanguard Extended. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Extended Market has no effect on the direction of Vanguard Mid-cap i.e., Vanguard Mid-cap and Vanguard Extended go up and down completely randomly.
Pair Corralation between Vanguard Mid-cap and Vanguard Extended
Assuming the 90 days horizon Vanguard Mid Cap Index is expected to generate 0.66 times more return on investment than Vanguard Extended. However, Vanguard Mid Cap Index is 1.52 times less risky than Vanguard Extended. It trades about -0.13 of its potential returns per unit of risk. Vanguard Extended Market is currently generating about -0.21 per unit of risk. If you would invest 7,520 in Vanguard Mid Cap Index on November 27, 2024 and sell it today you would lose (136.00) from holding Vanguard Mid Cap Index or give up 1.81% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Mid Cap Index vs. Vanguard Extended Market
Performance |
| Timeline |
| Vanguard Mid Cap |
| Vanguard Extended Market |
Vanguard Mid-cap and Vanguard Extended Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Mid-cap and Vanguard Extended
The main advantage of trading using opposite Vanguard Mid-cap and Vanguard Extended positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Mid-cap position performs unexpectedly, Vanguard Extended 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 Extended will offset losses from the drop in Vanguard Extended's long position.| Vanguard Mid-cap vs. Vanguard Small Cap Index | Vanguard Mid-cap vs. Vanguard Institutional Index | Vanguard Mid-cap vs. Vanguard Total Bond | Vanguard Mid-cap vs. Vanguard Total International |
| Vanguard Extended vs. Columbia Moderate Growth | Vanguard Extended vs. Wealthbuilder Moderate Balanced | Vanguard Extended vs. Blackrock Retirement Income | Vanguard Extended vs. Tiaa Cref Lifestyle Moderate |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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