Correlation Between Vanguard Small-cap and State Street
Can any of the company-specific risk be diversified away by investing in both Vanguard Small-cap and State Street 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 State Street 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 State Street Target, you can compare the effects of market volatilities on Vanguard Small-cap and State Street 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 State Street. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small-cap and State Street.
Diversification Opportunities for Vanguard Small-cap and State Street
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between VANGUARD and State is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Index and State Street Target in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Street Target 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 State Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of State Street Target has no effect on the direction of Vanguard Small-cap i.e., Vanguard Small-cap and State Street go up and down completely randomly.
Pair Corralation between Vanguard Small-cap and State Street
Assuming the 90 days horizon Vanguard Small Cap Index is expected to generate 2.65 times more return on investment than State Street. However, Vanguard Small-cap is 2.65 times more volatile than State Street Target. It trades about 0.15 of its potential returns per unit of risk. State Street Target is currently generating about -0.02 per unit of risk. If you would invest 32,711 in Vanguard Small Cap Index on August 25, 2024 and sell it today you would earn a total of 2,381 from holding Vanguard Small Cap Index or generate 7.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Small Cap Index vs. State Street Target
Performance |
| Timeline |
| Vanguard Small Cap |
| State Street Target |
Vanguard Small-cap and State Street Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Small-cap and State Street
The main advantage of trading using opposite Vanguard Small-cap and State Street positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Small-cap position performs unexpectedly, State Street 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 State Street will offset losses from the drop in State Street's long position.| Vanguard Small-cap vs. Angel Oak Financial | Vanguard Small-cap vs. Prudential Jennison Financial | Vanguard Small-cap vs. Blackrock Financial Institutions | Vanguard Small-cap vs. Gabelli Global Financial |
| State Street vs. The Hartford Small | State Street vs. The Hartford Small | State Street vs. Vanguard Small Cap Index | State Street vs. Massmutual Select Small |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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