Correlation Between Vanguard Small-cap and Enhanced
Can any of the company-specific risk be diversified away by investing in both Vanguard Small-cap and Enhanced 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 Enhanced into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Small Cap Index and Enhanced Large Pany, you can compare the effects of market volatilities on Vanguard Small-cap and Enhanced 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 Enhanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small-cap and Enhanced.
Diversification Opportunities for Vanguard Small-cap and Enhanced
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vanguard and Enhanced is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Index and Enhanced Large Pany in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enhanced Large Pany 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 Index are associated (or correlated) with Enhanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enhanced Large Pany has no effect on the direction of Vanguard Small-cap i.e., Vanguard Small-cap and Enhanced go up and down completely randomly.
Pair Corralation between Vanguard Small-cap and Enhanced
Assuming the 90 days horizon Vanguard Small Cap Index is expected to generate 1.38 times more return on investment than Enhanced. However, Vanguard Small-cap is 1.38 times more volatile than Enhanced Large Pany. It trades about 0.21 of its potential returns per unit of risk. Enhanced Large Pany is currently generating about 0.14 per unit of risk. If you would invest 11,341 in Vanguard Small Cap Index on August 24, 2024 and sell it today you would earn a total of 625.00 from holding Vanguard Small Cap Index or generate 5.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
Vanguard Small Cap Index vs. Enhanced Large Pany
Performance |
| Timeline |
| Vanguard Small Cap |
| Enhanced Large Pany |
Vanguard Small-cap and Enhanced Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Small-cap and Enhanced
The main advantage of trading using opposite Vanguard Small-cap and Enhanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Small-cap position performs unexpectedly, Enhanced 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 Enhanced will offset losses from the drop in Enhanced's long position.| Vanguard Small-cap vs. Vanguard Mid Cap Index | Vanguard Small-cap vs. Vanguard Total Bond | Vanguard Small-cap vs. Vanguard Institutional Index | Vanguard Small-cap vs. Vanguard Total International |
| Enhanced vs. Us Micro Cap | Enhanced vs. Dfa Short Term Government | Enhanced vs. Emerging Markets Small | Enhanced vs. Dfa One Year Fixed |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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