Correlation Between Vanguard Small and Smallcap Value
Can any of the company-specific risk be diversified away by investing in both Vanguard Small and Smallcap Value 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 Smallcap Value 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 Smallcap Value Fund, you can compare the effects of market volatilities on Vanguard Small and Smallcap Value 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 Smallcap Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small and Smallcap Value.
Diversification Opportunities for Vanguard Small and Smallcap Value
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vanguard and Smallcap is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Value and Smallcap Value Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smallcap Value 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 Smallcap Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smallcap Value has no effect on the direction of Vanguard Small i.e., Vanguard Small and Smallcap Value go up and down completely randomly.
Pair Corralation between Vanguard Small and Smallcap Value
Assuming the 90 days horizon Vanguard Small Cap Value is expected to generate 0.84 times more return on investment than Smallcap Value. However, Vanguard Small Cap Value is 1.19 times less risky than Smallcap Value. It trades about 0.06 of its potential returns per unit of risk. Smallcap Value Fund is currently generating about 0.03 per unit of risk. If you would invest 3,763 in Vanguard Small Cap Value on September 2, 2024 and sell it today you would earn a total of 1,423 from holding Vanguard Small Cap Value or generate 37.82% 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. Smallcap Value Fund
Performance |
| Timeline |
| Vanguard Small Cap |
| Smallcap Value |
Vanguard Small and Smallcap Value Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Small and Smallcap Value
The main advantage of trading using opposite Vanguard Small and Smallcap Value positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Small position performs unexpectedly, Smallcap Value 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 Smallcap Value will offset losses from the drop in Smallcap Value'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 |
| Smallcap Value vs. Strategic Asset Management | Smallcap Value vs. Strategic Asset Management | Smallcap Value vs. Strategic Asset Management | Smallcap Value vs. Strategic Asset Management |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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