Correlation Between Vanguard Small-cap and Westwood Smidcap
Can any of the company-specific risk be diversified away by investing in both Vanguard Small-cap and Westwood Smidcap 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 Westwood Smidcap 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 Westwood Smidcap Fund, you can compare the effects of market volatilities on Vanguard Small-cap and Westwood Smidcap 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 Westwood Smidcap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small-cap and Westwood Smidcap.
Diversification Opportunities for Vanguard Small-cap and Westwood Smidcap
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Vanguard and Westwood is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Index and Westwood Smidcap Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westwood Smidcap 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 Westwood Smidcap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westwood Smidcap has no effect on the direction of Vanguard Small-cap i.e., Vanguard Small-cap and Westwood Smidcap go up and down completely randomly.
Pair Corralation between Vanguard Small-cap and Westwood Smidcap
Assuming the 90 days horizon Vanguard Small Cap Index is expected to under-perform the Westwood Smidcap. In addition to that, Vanguard Small-cap is 1.09 times more volatile than Westwood Smidcap Fund. It trades about -0.25 of its total potential returns per unit of risk. Westwood Smidcap Fund is currently generating about -0.25 per unit of volatility. If you would invest 1,654 in Westwood Smidcap Fund on November 29, 2024 and sell it today you would lose (70.00) from holding Westwood Smidcap Fund or give up 4.23% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Small Cap Index vs. Westwood Smidcap Fund
Performance |
| Timeline |
| Vanguard Small Cap |
| Westwood Smidcap |
Vanguard Small-cap and Westwood Smidcap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Small-cap and Westwood Smidcap
The main advantage of trading using opposite Vanguard Small-cap and Westwood Smidcap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Small-cap position performs unexpectedly, Westwood Smidcap 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 Westwood Smidcap will offset losses from the drop in Westwood Smidcap'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 |
| Westwood Smidcap vs. Transamerica High Yield | Westwood Smidcap vs. Msift High Yield | Westwood Smidcap vs. Ab High Income | Westwood Smidcap vs. Alpine High Yield |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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