Correlation Between Vanguard Small-cap and Vanguard Lifestrategy
Can any of the company-specific risk be diversified away by investing in both Vanguard Small-cap and Vanguard Lifestrategy 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 Lifestrategy 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 Lifestrategy Moderate, you can compare the effects of market volatilities on Vanguard Small-cap and Vanguard Lifestrategy 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 Lifestrategy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small-cap and Vanguard Lifestrategy.
Diversification Opportunities for Vanguard Small-cap and Vanguard Lifestrategy
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vanguard and Vanguard is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Index and Vanguard Lifestrategy Moderate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Lifestrategy 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 Lifestrategy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Lifestrategy has no effect on the direction of Vanguard Small-cap i.e., Vanguard Small-cap and Vanguard Lifestrategy go up and down completely randomly.
Pair Corralation between Vanguard Small-cap and Vanguard Lifestrategy
Assuming the 90 days horizon Vanguard Small Cap Index is expected to generate 2.93 times more return on investment than Vanguard Lifestrategy. However, Vanguard Small-cap is 2.93 times more volatile than Vanguard Lifestrategy Moderate. It trades about 0.31 of its potential returns per unit of risk. Vanguard Lifestrategy Moderate is currently generating about 0.14 per unit of risk. If you would invest 33,047 in Vanguard Small Cap Index on August 31, 2024 and sell it today you would earn a total of 2,866 from holding Vanguard Small Cap Index or generate 8.67% 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 Lifestrategy Moderate
Performance |
| Timeline |
| Vanguard Small Cap |
| Vanguard Lifestrategy |
Vanguard Small-cap and Vanguard Lifestrategy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Small-cap and Vanguard Lifestrategy
The main advantage of trading using opposite Vanguard Small-cap and Vanguard Lifestrategy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Small-cap position performs unexpectedly, Vanguard Lifestrategy 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 Lifestrategy will offset losses from the drop in Vanguard Lifestrategy's long position.The idea behind Vanguard Small Cap Index and Vanguard Lifestrategy Moderate pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
Other Complementary Tools
| Positions Ratings Determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| CEOs Directory Screen CEOs from public companies around the world | |
| Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities |