Correlation Between Vanguard Small-cap and Washington Mutual
Can any of the company-specific risk be diversified away by investing in both Vanguard Small-cap and Washington Mutual 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 Washington Mutual 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 Washington Mutual Investors, you can compare the effects of market volatilities on Vanguard Small-cap and Washington Mutual 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 Washington Mutual. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small-cap and Washington Mutual.
Diversification Opportunities for Vanguard Small-cap and Washington Mutual
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vanguard and Washington is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Index and Washington Mutual Investors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Washington Mutual 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 Washington Mutual. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Washington Mutual has no effect on the direction of Vanguard Small-cap i.e., Vanguard Small-cap and Washington Mutual go up and down completely randomly.
Pair Corralation between Vanguard Small-cap and Washington Mutual
Assuming the 90 days horizon Vanguard Small Cap Index is expected to generate 1.61 times more return on investment than Washington Mutual. However, Vanguard Small-cap is 1.61 times more volatile than Washington Mutual Investors. It trades about 0.07 of its potential returns per unit of risk. Washington Mutual Investors is currently generating about 0.1 per unit of risk. If you would invest 8,754 in Vanguard Small Cap Index on August 27, 2024 and sell it today you would earn a total of 3,591 from holding Vanguard Small Cap Index or generate 41.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Small Cap Index vs. Washington Mutual Investors
Performance |
| Timeline |
| Vanguard Small Cap |
| Washington Mutual |
Vanguard Small-cap and Washington Mutual Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Small-cap and Washington Mutual
The main advantage of trading using opposite Vanguard Small-cap and Washington Mutual positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Small-cap position performs unexpectedly, Washington Mutual 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 Washington Mutual will offset losses from the drop in Washington Mutual'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 |
| Washington Mutual vs. John Hancock Government | Washington Mutual vs. Invesco Government Fund | Washington Mutual vs. Dunham Porategovernment Bond | Washington Mutual vs. Fidelity Series Government |
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 Managers module to screen money managers from public funds and ETFs managed around the world.
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