Correlation Between Vanguard Small and Third Avenue
Can any of the company-specific risk be diversified away by investing in both Vanguard Small and Third Avenue 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 Third Avenue 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 Third Avenue Small Cap, you can compare the effects of market volatilities on Vanguard Small and Third Avenue 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 Third Avenue. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small and Third Avenue.
Diversification Opportunities for Vanguard Small and Third Avenue
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Vanguard and Third is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Value and Third Avenue Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Third Avenue Small 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 Third Avenue. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Third Avenue Small has no effect on the direction of Vanguard Small i.e., Vanguard Small and Third Avenue go up and down completely randomly.
Pair Corralation between Vanguard Small and Third Avenue
Assuming the 90 days horizon Vanguard Small Cap Value is expected to generate 0.87 times more return on investment than Third Avenue. However, Vanguard Small Cap Value is 1.15 times less risky than Third Avenue. It trades about 0.32 of its potential returns per unit of risk. Third Avenue Small Cap is currently generating about 0.16 per unit of risk. If you would invest 4,773 in Vanguard Small Cap Value on September 1, 2024 and sell it today you would earn a total of 407.00 from holding Vanguard Small Cap Value or generate 8.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Small Cap Value vs. Third Avenue Small Cap
Performance |
| Timeline |
| Vanguard Small Cap |
| Third Avenue Small |
Vanguard Small and Third Avenue Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Small and Third Avenue
The main advantage of trading using opposite Vanguard Small and Third Avenue positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Small position performs unexpectedly, Third Avenue 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 Third Avenue will offset losses from the drop in Third Avenue'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 |
| Third Avenue vs. Third Avenue Real | Third Avenue vs. Rems International Real | Third Avenue vs. Third Avenue Real | Third Avenue vs. Third Avenue 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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