Correlation Between Vanguard Small and Applied Finance
Can any of the company-specific risk be diversified away by investing in both Vanguard Small and Applied Finance 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 Applied Finance 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 Applied Finance Explorer, you can compare the effects of market volatilities on Vanguard Small and Applied Finance 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 Applied Finance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small and Applied Finance.
Diversification Opportunities for Vanguard Small and Applied Finance
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vanguard and Applied is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Value and Applied Finance Explorer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Finance Explorer 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 Applied Finance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Finance Explorer has no effect on the direction of Vanguard Small i.e., Vanguard Small and Applied Finance go up and down completely randomly.
Pair Corralation between Vanguard Small and Applied Finance
Assuming the 90 days horizon Vanguard Small Cap Value is expected to generate 0.84 times more return on investment than Applied Finance. However, Vanguard Small Cap Value is 1.19 times less risky than Applied Finance. It trades about 0.33 of its potential returns per unit of risk. Applied Finance Explorer is currently generating about 0.26 per unit of risk. If you would invest 4,773 in Vanguard Small Cap Value on September 2, 2024 and sell it today you would earn a total of 413.00 from holding Vanguard Small Cap Value or generate 8.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Small Cap Value vs. Applied Finance Explorer
Performance |
| Timeline |
| Vanguard Small Cap |
| Applied Finance Explorer |
Vanguard Small and Applied Finance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Small and Applied Finance
The main advantage of trading using opposite Vanguard Small and Applied Finance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Small position performs unexpectedly, Applied Finance 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 Applied Finance will offset losses from the drop in Applied Finance's long position.| Vanguard Small vs. Tax Managed Mid Small | Vanguard Small vs. Delaware Limited Term Diversified | Vanguard Small vs. American Century Diversified | Vanguard Small vs. Lord Abbett Diversified |
| Applied Finance vs. Thrivent Small Cap | Applied Finance vs. Applied Finance Select | Applied Finance vs. Parnassus Endeavor Fund | Applied Finance vs. Queens Road Small |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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