Correlation Between Vanguard Small and Morningstar Defensive
Can any of the company-specific risk be diversified away by investing in both Vanguard Small and Morningstar Defensive 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 and Morningstar Defensive 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 Morningstar Defensive Bond, you can compare the effects of market volatilities on Vanguard Small and Morningstar Defensive 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 with a short position of Morningstar Defensive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small and Morningstar Defensive.
Diversification Opportunities for Vanguard Small and Morningstar Defensive
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Vanguard and Morningstar is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Index and Morningstar Defensive Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morningstar Defensive and Vanguard Small 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 Morningstar Defensive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Morningstar Defensive has no effect on the direction of Vanguard Small i.e., Vanguard Small and Morningstar Defensive go up and down completely randomly.
Pair Corralation between Vanguard Small and Morningstar Defensive
Assuming the 90 days horizon Vanguard Small Cap Index is expected to generate 6.98 times more return on investment than Morningstar Defensive. However, Vanguard Small is 6.98 times more volatile than Morningstar Defensive Bond. It trades about 0.07 of its potential returns per unit of risk. Morningstar Defensive Bond is currently generating about 0.14 per unit of risk. If you would invest 24,589 in Vanguard Small Cap Index on September 12, 2024 and sell it today you would earn a total of 10,909 from holding Vanguard Small Cap Index or generate 44.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Small Cap Index vs. Morningstar Defensive Bond
Performance |
| Timeline |
| Vanguard Small Cap |
| Morningstar Defensive |
Vanguard Small and Morningstar Defensive Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Small and Morningstar Defensive
The main advantage of trading using opposite Vanguard Small and Morningstar Defensive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Small position performs unexpectedly, Morningstar Defensive 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 Morningstar Defensive will offset losses from the drop in Morningstar Defensive's long position.| Vanguard Small vs. Morningstar Defensive Bond | Vanguard Small vs. T Rowe Price | Vanguard Small vs. Bbh Intermediate Municipal | Vanguard Small vs. The National Tax Free |
| Morningstar Defensive vs. SCOR PK | Morningstar Defensive vs. Morningstar Unconstrained Allocation | Morningstar Defensive vs. Via Renewables | Morningstar Defensive vs. Bondbloxx ETF Trust |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
Other Complementary Tools
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
| Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments | |
| Companies Directory Evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
| Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules |