Correlation Between Vanguard Small-cap and Vanguard California
Can any of the company-specific risk be diversified away by investing in both Vanguard Small-cap and Vanguard California 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 Vanguard California 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 Vanguard California Intermediate Term, you can compare the effects of market volatilities on Vanguard Small-cap and Vanguard California 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 Vanguard California. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small-cap and Vanguard California.
Diversification Opportunities for Vanguard Small-cap and Vanguard California
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vanguard and Vanguard is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Index and Vanguard California Intermedia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard California 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 Vanguard California. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard California has no effect on the direction of Vanguard Small-cap i.e., Vanguard Small-cap and Vanguard California go up and down completely randomly.
Pair Corralation between Vanguard Small-cap and Vanguard California
Assuming the 90 days horizon Vanguard Small Cap Index is expected to generate 4.89 times more return on investment than Vanguard California. However, Vanguard Small-cap is 4.89 times more volatile than Vanguard California Intermediate Term. It trades about 0.19 of its potential returns per unit of risk. Vanguard California Intermediate Term is currently generating about 0.05 per unit of risk. If you would invest 33,734 in Vanguard Small Cap Index on October 25, 2024 and sell it today you would earn a total of 1,024 from holding Vanguard Small Cap Index or generate 3.04% 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. Vanguard California Intermedia
Performance |
| Timeline |
| Vanguard Small Cap |
| Vanguard California |
Vanguard Small-cap and Vanguard California Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Small-cap and Vanguard California
The main advantage of trading using opposite Vanguard Small-cap and Vanguard California positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Small-cap position performs unexpectedly, Vanguard California 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 Vanguard California will offset losses from the drop in Vanguard California's long position.| Vanguard Small-cap vs. Blrc Sgy Mnp | Vanguard Small-cap vs. Rbc Ultra Short Fixed | Vanguard Small-cap vs. Metropolitan West Porate | Vanguard Small-cap vs. Bbh Intermediate Municipal |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
Other Complementary Tools
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
| Sectors List of equity sectors categorizing publicly traded companies based on their primary business activities | |
| Cryptocurrency Center Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency |