Correlation Between Vanguard Small-cap and Mesirow Financial
Can any of the company-specific risk be diversified away by investing in both Vanguard Small-cap and Mesirow Financial 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 Mesirow Financial 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 Mesirow Financial Small, you can compare the effects of market volatilities on Vanguard Small-cap and Mesirow Financial 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 Mesirow Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small-cap and Mesirow Financial.
Diversification Opportunities for Vanguard Small-cap and Mesirow Financial
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Vanguard and Mesirow is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Index and Mesirow Financial Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mesirow Financial Small 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 Mesirow Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mesirow Financial Small has no effect on the direction of Vanguard Small-cap i.e., Vanguard Small-cap and Mesirow Financial go up and down completely randomly.
Pair Corralation between Vanguard Small-cap and Mesirow Financial
Assuming the 90 days horizon Vanguard Small Cap Index is expected to generate 0.95 times more return on investment than Mesirow Financial. However, Vanguard Small Cap Index is 1.06 times less risky than Mesirow Financial. It trades about -0.23 of its potential returns per unit of risk. Mesirow Financial Small is currently generating about -0.24 per unit of risk. If you would invest 11,942 in Vanguard Small Cap Index on November 27, 2024 and sell it today you would lose (501.00) from holding Vanguard Small Cap Index or give up 4.2% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Small Cap Index vs. Mesirow Financial Small
Performance |
| Timeline |
| Vanguard Small Cap |
| Mesirow Financial Small |
Vanguard Small-cap and Mesirow Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Small-cap and Mesirow Financial
The main advantage of trading using opposite Vanguard Small-cap and Mesirow Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Small-cap position performs unexpectedly, Mesirow Financial 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 Mesirow Financial will offset losses from the drop in Mesirow Financial'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 |
| Mesirow Financial vs. Credit Suisse Multialternative | Mesirow Financial vs. Small Pany Growth | Mesirow Financial vs. Glg Intl Small | Mesirow Financial vs. Versatile Bond 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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