Correlation Between Vanguard Small-cap and North Square
Can any of the company-specific risk be diversified away by investing in both Vanguard Small-cap and North Square 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 North Square 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 North Square Kennedy, you can compare the effects of market volatilities on Vanguard Small-cap and North Square 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 North Square. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small-cap and North Square.
Diversification Opportunities for Vanguard Small-cap and North Square
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vanguard and North is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Index and North Square Kennedy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North Square Kennedy 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 North Square. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North Square Kennedy has no effect on the direction of Vanguard Small-cap i.e., Vanguard Small-cap and North Square go up and down completely randomly.
Pair Corralation between Vanguard Small-cap and North Square
Assuming the 90 days horizon Vanguard Small-cap is expected to generate 2.27 times less return on investment than North Square. But when comparing it to its historical volatility, Vanguard Small Cap Index is 1.31 times less risky than North Square. It trades about 0.08 of its potential returns per unit of risk. North Square Kennedy is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 1,015 in North Square Kennedy on August 31, 2024 and sell it today you would earn a total of 258.00 from holding North Square Kennedy or generate 25.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 31.9% |
| Values | Daily Returns |
Vanguard Small Cap Index vs. North Square Kennedy
Performance |
| Timeline |
| Vanguard Small Cap |
| North Square Kennedy |
Vanguard Small-cap and North Square Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Small-cap and North Square
The main advantage of trading using opposite Vanguard Small-cap and North Square positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Small-cap position performs unexpectedly, North Square 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 North Square will offset losses from the drop in North Square'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 |
| North Square vs. Vanguard Small Cap Index | North Square vs. T Rowe Price | North Square vs. HUMANA INC | North Square vs. SCOR PK |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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