Correlation Between Vanguard Small-cap and Common Stock
Can any of the company-specific risk be diversified away by investing in both Vanguard Small-cap and Common Stock 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 Common Stock into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Small Cap Index and Common Stock Fund, you can compare the effects of market volatilities on Vanguard Small-cap and Common Stock 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 Common Stock. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small-cap and Common Stock.
Diversification Opportunities for Vanguard Small-cap and Common Stock
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vanguard and Common is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Index and Common Stock Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Common Stock 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 Index are associated (or correlated) with Common Stock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Common Stock has no effect on the direction of Vanguard Small-cap i.e., Vanguard Small-cap and Common Stock go up and down completely randomly.
Pair Corralation between Vanguard Small-cap and Common Stock
Assuming the 90 days horizon Vanguard Small Cap Index is expected to generate 1.07 times more return on investment than Common Stock. However, Vanguard Small-cap is 1.07 times more volatile than Common Stock Fund. It trades about 0.08 of its potential returns per unit of risk. Common Stock Fund is currently generating about 0.08 per unit of risk. If you would invest 9,147 in Vanguard Small Cap Index on August 31, 2024 and sell it today you would earn a total of 3,295 from holding Vanguard Small Cap Index or generate 36.02% 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 Index vs. Common Stock Fund
Performance |
| Timeline |
| Vanguard Small Cap |
| Common Stock |
Vanguard Small-cap and Common Stock Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Small-cap and Common Stock
The main advantage of trading using opposite Vanguard Small-cap and Common Stock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Small-cap position performs unexpectedly, Common Stock 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 Common Stock will offset losses from the drop in Common Stock's long position.| Vanguard Small-cap vs. Vanguard Mid Cap Index | Vanguard Small-cap vs. Vanguard 500 Index | Vanguard Small-cap vs. Vanguard Emerging Markets | Vanguard Small-cap vs. Vanguard Reit Index |
| Common Stock vs. Large Cap Fund | Common Stock vs. Madison Mid Cap | Common Stock vs. Royce Premier Fund | Common Stock vs. The Jensen Portfolio |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
Other Complementary Tools
| Odds Of Bankruptcy Get analysis of equity chance of financial distress in the next 2 years | |
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital | |
| Balance Of Power Check stock momentum by analyzing Balance Of Power indicator and other technical ratios | |
| Cryptocurrency Center Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency | |
| Funds Screener Find actively-traded funds from around the world traded on over 30 global exchanges |