Correlation Between Vanguard Small-cap and Paradigm Value
Can any of the company-specific risk be diversified away by investing in both Vanguard Small-cap and Paradigm Value 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 Paradigm Value 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 Paradigm Value Fund, you can compare the effects of market volatilities on Vanguard Small-cap and Paradigm Value 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 Paradigm Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small-cap and Paradigm Value.
Diversification Opportunities for Vanguard Small-cap and Paradigm Value
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vanguard and Paradigm is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Index and Paradigm Value Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paradigm Value 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 Paradigm Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paradigm Value has no effect on the direction of Vanguard Small-cap i.e., Vanguard Small-cap and Paradigm Value go up and down completely randomly.
Pair Corralation between Vanguard Small-cap and Paradigm Value
Assuming the 90 days horizon Vanguard Small Cap Index is expected to generate 0.84 times more return on investment than Paradigm Value. However, Vanguard Small Cap Index is 1.19 times less risky than Paradigm Value. It trades about 0.4 of its potential returns per unit of risk. Paradigm Value Fund is currently generating about 0.27 per unit of risk. If you would invest 32,583 in Vanguard Small Cap Index on September 1, 2024 and sell it today you would earn a total of 3,422 from holding Vanguard Small Cap Index or generate 10.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Vanguard Small Cap Index vs. Paradigm Value Fund
Performance |
| Timeline |
| Vanguard Small Cap |
| Paradigm Value |
Vanguard Small-cap and Paradigm Value Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Small-cap and Paradigm Value
The main advantage of trading using opposite Vanguard Small-cap and Paradigm Value positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Small-cap position performs unexpectedly, Paradigm Value 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 Paradigm Value will offset losses from the drop in Paradigm Value's long position.| Vanguard Small-cap vs. Hartford Healthcare Hls | Vanguard Small-cap vs. Alger Health Sciences | Vanguard Small-cap vs. Alphacentric Lifesci Healthcare | Vanguard Small-cap vs. Tekla Healthcare Opportunities |
| Paradigm Value vs. Royce Small Cap Value | Paradigm Value vs. Royce Smaller Companies Growth | Paradigm Value vs. Kinetics Paradigm Fund | Paradigm Value vs. Tcw Relative Value |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
Other Complementary Tools
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital |