Correlation Between Vanguard Small-cap and Wasatch Core
Can any of the company-specific risk be diversified away by investing in both Vanguard Small-cap and Wasatch Core 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 Wasatch Core into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Small Cap Growth and Wasatch E Growth, you can compare the effects of market volatilities on Vanguard Small-cap and Wasatch Core 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 Wasatch Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small-cap and Wasatch Core.
Diversification Opportunities for Vanguard Small-cap and Wasatch Core
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Vanguard and Wasatch is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Growth and Wasatch E Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wasatch E Growth 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 Growth are associated (or correlated) with Wasatch Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wasatch E Growth has no effect on the direction of Vanguard Small-cap i.e., Vanguard Small-cap and Wasatch Core go up and down completely randomly.
Pair Corralation between Vanguard Small-cap and Wasatch Core
Assuming the 90 days horizon Vanguard Small Cap Growth is expected to generate 0.92 times more return on investment than Wasatch Core. However, Vanguard Small Cap Growth is 1.08 times less risky than Wasatch Core. It trades about 0.47 of its potential returns per unit of risk. Wasatch E Growth is currently generating about 0.35 per unit of risk. If you would invest 9,380 in Vanguard Small Cap Growth on September 1, 2024 and sell it today you would earn a total of 1,210 from holding Vanguard Small Cap Growth or generate 12.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Vanguard Small Cap Growth vs. Wasatch E Growth
Performance |
| Timeline |
| Vanguard Small Cap |
| Wasatch E Growth |
Vanguard Small-cap and Wasatch Core Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Small-cap and Wasatch Core
The main advantage of trading using opposite Vanguard Small-cap and Wasatch Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Small-cap position performs unexpectedly, Wasatch Core 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 Wasatch Core will offset losses from the drop in Wasatch Core's long position.| 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 |
| Wasatch Core vs. Wasatch Small Cap | Wasatch Core vs. Wasatch Small Cap | Wasatch Core vs. Wasatch Micro Cap | Wasatch Core vs. Wasatch Ultra Growth |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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