Correlation Between Vanguard Small and Vanguard Mid-cap
Can any of the company-specific risk be diversified away by investing in both Vanguard Small and Vanguard Mid-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 Small and Vanguard Mid-cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Small Cap Value and Vanguard Mid Cap Growth, you can compare the effects of market volatilities on Vanguard Small and Vanguard Mid-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 Small with a short position of Vanguard Mid-cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small and Vanguard Mid-cap.
Diversification Opportunities for Vanguard Small and Vanguard Mid-cap
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vanguard and Vanguard is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Value and Vanguard Mid Cap Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Mid Cap and Vanguard Small 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 Value are associated (or correlated) with Vanguard Mid-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 Mid Cap has no effect on the direction of Vanguard Small i.e., Vanguard Small and Vanguard Mid-cap go up and down completely randomly.
Pair Corralation between Vanguard Small and Vanguard Mid-cap
Assuming the 90 days horizon Vanguard Small is expected to generate 1.03 times less return on investment than Vanguard Mid-cap. In addition to that, Vanguard Small is 1.12 times more volatile than Vanguard Mid Cap Growth. It trades about 0.09 of its total potential returns per unit of risk. Vanguard Mid Cap Growth is currently generating about 0.1 per unit of volatility. If you would invest 8,393 in Vanguard Mid Cap Growth on August 31, 2024 and sell it today you would earn a total of 3,257 from holding Vanguard Mid Cap Growth or generate 38.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.73% |
| Values | Daily Returns |
Vanguard Small Cap Value vs. Vanguard Mid Cap Growth
Performance |
| Timeline |
| Vanguard Small Cap |
| Vanguard Mid Cap |
Vanguard Small and Vanguard Mid-cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Small and Vanguard Mid-cap
The main advantage of trading using opposite Vanguard Small and Vanguard Mid-cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Small position performs unexpectedly, Vanguard Mid-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 Mid-cap will offset losses from the drop in Vanguard Mid-cap's long position.| Vanguard Small vs. Vanguard Mid Cap Value | Vanguard Small vs. Vanguard Value Index | Vanguard Small vs. Vanguard Small Cap Growth | Vanguard Small vs. Vanguard Emerging Markets |
| Vanguard Mid-cap vs. T Rowe Price | Vanguard Mid-cap vs. T Rowe Price | Vanguard Mid-cap vs. T Rowe Price | Vanguard Mid-cap vs. T Rowe Price |
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 Channel module to use Commodity Channel Index to analyze current equity momentum.
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