Correlation Between Vanguard Small-cap and Small Company
Can any of the company-specific risk be diversified away by investing in both Vanguard Small-cap and Small Company 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 Small Company 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 Small Pany Growth, you can compare the effects of market volatilities on Vanguard Small-cap and Small Company 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 Small Company. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small-cap and Small Company.
Diversification Opportunities for Vanguard Small-cap and Small Company
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Vanguard and Small is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Growth and Small Pany Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Pany 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 Small Company. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Pany Growth has no effect on the direction of Vanguard Small-cap i.e., Vanguard Small-cap and Small Company go up and down completely randomly.
Pair Corralation between Vanguard Small-cap and Small Company
Assuming the 90 days horizon Vanguard Small Cap Growth is expected to generate 0.87 times more return on investment than Small Company. However, Vanguard Small Cap Growth is 1.15 times less risky than Small Company. It trades about 0.12 of its potential returns per unit of risk. Small Pany Growth is currently generating about 0.05 per unit of risk. If you would invest 7,085 in Vanguard Small Cap Growth on August 25, 2024 and sell it today you would earn a total of 1,296 from holding Vanguard Small Cap Growth or generate 18.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Small Cap Growth vs. Small Pany Growth
Performance |
| Timeline |
| Vanguard Small Cap |
| Small Pany Growth |
Vanguard Small-cap and Small Company Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Small-cap and Small Company
The main advantage of trading using opposite Vanguard Small-cap and Small Company positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Small-cap position performs unexpectedly, Small Company 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 Small Company will offset losses from the drop in Small Company's long position.| Vanguard Small-cap vs. Hennessy Bp Energy | Vanguard Small-cap vs. Goehring Rozencwajg Resources | Vanguard Small-cap vs. Firsthand Alternative Energy | Vanguard Small-cap vs. World Energy Fund |
| Small Company vs. Vanguard Small Cap Growth | Small Company vs. Vanguard Small Cap Growth | Small Company vs. Vanguard Explorer Fund | Small Company vs. Vanguard Explorer 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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