Correlation Between Vanguard Extended and Vanguard Small-cap
Can any of the company-specific risk be diversified away by investing in both Vanguard Extended and Vanguard Small-cap 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 Extended and Vanguard Small-cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Extended Market and Vanguard Small Cap Growth, you can compare the effects of market volatilities on Vanguard Extended and Vanguard Small-cap 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 Extended with a short position of Vanguard Small-cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Extended and Vanguard Small-cap.
Diversification Opportunities for Vanguard Extended and Vanguard Small-cap
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Vanguard and Vanguard is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Extended Market and Vanguard Small Cap Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Small Cap and Vanguard Extended 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 Extended Market are associated (or correlated) with Vanguard Small-cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Small Cap has no effect on the direction of Vanguard Extended i.e., Vanguard Extended and Vanguard Small-cap go up and down completely randomly.
Pair Corralation between Vanguard Extended and Vanguard Small-cap
Assuming the 90 days horizon Vanguard Extended Market is expected to generate 0.96 times more return on investment than Vanguard Small-cap. However, Vanguard Extended Market is 1.04 times less risky than Vanguard Small-cap. It trades about 0.12 of its potential returns per unit of risk. Vanguard Small Cap Growth is currently generating about 0.11 per unit of risk. If you would invest 17,982 in Vanguard Extended Market on August 26, 2024 and sell it today you would earn a total of 6,818 from holding Vanguard Extended Market or generate 37.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Extended Market vs. Vanguard Small Cap Growth
Performance |
| Timeline |
| Vanguard Extended Market |
| Vanguard Small Cap |
Vanguard Extended and Vanguard Small-cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Extended and Vanguard Small-cap
The main advantage of trading using opposite Vanguard Extended and Vanguard Small-cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Extended position performs unexpectedly, Vanguard Small-cap 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 Small-cap will offset losses from the drop in Vanguard Small-cap's long position.| Vanguard Extended vs. T Rowe Price | Vanguard Extended vs. Smallcap Growth Fund | Vanguard Extended vs. Chase Growth Fund | Vanguard Extended vs. L Abbett Growth |
| Vanguard Small-cap vs. Vanguard International Growth | Vanguard Small-cap vs. Vanguard Windsor Ii | Vanguard Small-cap vs. Vanguard Primecap Fund | Vanguard Small-cap vs. Vanguard Growth Fund |
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 CEOs Directory module to screen CEOs from public companies around the world.
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