Correlation Between Vanguard Small-cap and Hodges Small
Can any of the company-specific risk be diversified away by investing in both Vanguard Small-cap and Hodges Small 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 Hodges Small 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 Hodges Small Cap, you can compare the effects of market volatilities on Vanguard Small-cap and Hodges Small 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 Hodges Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small-cap and Hodges Small.
Diversification Opportunities for Vanguard Small-cap and Hodges Small
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Vanguard and Hodges is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Index and Hodges Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hodges Small Cap 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 Hodges Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hodges Small Cap has no effect on the direction of Vanguard Small-cap i.e., Vanguard Small-cap and Hodges Small go up and down completely randomly.
Pair Corralation between Vanguard Small-cap and Hodges Small
Assuming the 90 days horizon Vanguard Small-cap is expected to generate 1.31 times less return on investment than Hodges Small. But when comparing it to its historical volatility, Vanguard Small Cap Index is 1.17 times less risky than Hodges Small. It trades about 0.11 of its potential returns per unit of risk. Hodges Small Cap is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 1,927 in Hodges Small Cap on August 28, 2024 and sell it today you would earn a total of 710.00 from holding Hodges Small Cap or generate 36.84% 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 Index vs. Hodges Small Cap
Performance |
| Timeline |
| Vanguard Small Cap |
| Hodges Small Cap |
Vanguard Small-cap and Hodges Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Small-cap and Hodges Small
The main advantage of trading using opposite Vanguard Small-cap and Hodges Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Small-cap position performs unexpectedly, Hodges Small 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 Hodges Small will offset losses from the drop in Hodges Small'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 |
| Hodges Small vs. Hodges Fund Retail | Hodges Small vs. Amg Southernsun Small | Hodges Small vs. Brown Advisory Growth | Hodges Small vs. Eventide Gilead Fund |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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