Correlation Between Vanguard Small-cap and Vanguard Total

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Can any of the company-specific risk be diversified away by investing in both Vanguard Small-cap and Vanguard Total 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 Total 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 Total International, you can compare the effects of market volatilities on Vanguard Small-cap and Vanguard Total 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 Total. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small-cap and Vanguard Total.

Diversification Opportunities for Vanguard Small-cap and Vanguard Total

-0.34
  Correlation Coefficient

Very good diversification

The 3 months correlation between Vanguard and Vanguard is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Value and Vanguard Total International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Total Inter 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 Value are associated (or correlated) with Vanguard Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Total Inter has no effect on the direction of Vanguard Small-cap i.e., Vanguard Small-cap and Vanguard Total go up and down completely randomly.

Pair Corralation between Vanguard Small-cap and Vanguard Total

Assuming the 90 days horizon Vanguard Small Cap Value is expected to under-perform the Vanguard Total. In addition to that, Vanguard Small-cap is 1.38 times more volatile than Vanguard Total International. It trades about -0.03 of its total potential returns per unit of risk. Vanguard Total International is currently generating about 0.07 per unit of volatility. If you would invest  13,335  in Vanguard Total International on September 10, 2024 and sell it today you would earn a total of  110.00  from holding Vanguard Total International or generate 0.82% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy95.24%
ValuesDaily Returns

Vanguard Small Cap Value  vs.  Vanguard Total International

 Performance 
       Timeline  
Vanguard Small Cap 

Risk-Adjusted Performance

15 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Small Cap Value are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Vanguard Small-cap may actually be approaching a critical reversion point that can send shares even higher in January 2025.
Vanguard Total Inter 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Total International are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Vanguard Total is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Vanguard Small-cap and Vanguard Total Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Vanguard Small-cap and Vanguard Total

The main advantage of trading using opposite Vanguard Small-cap and Vanguard Total positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Small-cap position performs unexpectedly, Vanguard Total 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 Total will offset losses from the drop in Vanguard Total's long position.
The idea behind Vanguard Small Cap Value and Vanguard Total International 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.
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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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