Correlation Between Vanguard Small and First American
Can any of the company-specific risk be diversified away by investing in both Vanguard Small and First American 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 First American 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 First American Investment, you can compare the effects of market volatilities on Vanguard Small and First American 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 First American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small and First American.
Diversification Opportunities for Vanguard Small and First American
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vanguard and First is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Value and First American Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First American Investment 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 First American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First American Investment has no effect on the direction of Vanguard Small i.e., Vanguard Small and First American go up and down completely randomly.
Pair Corralation between Vanguard Small and First American
Assuming the 90 days horizon Vanguard Small is expected to generate 1.21 times less return on investment than First American. But when comparing it to its historical volatility, Vanguard Small Cap Value is 1.22 times less risky than First American. It trades about 0.12 of its potential returns per unit of risk. First American Investment is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 2,987 in First American Investment on September 1, 2024 and sell it today you would earn a total of 604.00 from holding First American Investment or generate 20.22% 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. First American Investment
Performance |
| Timeline |
| Vanguard Small Cap |
| First American Investment |
Vanguard Small and First American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Small and First American
The main advantage of trading using opposite Vanguard Small and First American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Small position performs unexpectedly, First American 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 First American will offset losses from the drop in First American's long position.| Vanguard Small vs. Fidelity Advisor Financial | Vanguard Small vs. Goldman Sachs Financial | Vanguard Small vs. Icon Financial Fund | Vanguard Small vs. Royce Global Financial |
| First American vs. Nuveen Mid Cap | First American vs. Nuveen Mid Cap | First American vs. Nuveen Small Cap | First American vs. Nuveen Small Cap |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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