Correlation Between Vanguard Small-cap and Federated Mdt
Can any of the company-specific risk be diversified away by investing in both Vanguard Small-cap and Federated Mdt 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 Federated Mdt 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 Federated Mdt Small, you can compare the effects of market volatilities on Vanguard Small-cap and Federated Mdt 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 Federated Mdt. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small-cap and Federated Mdt.
Diversification Opportunities for Vanguard Small-cap and Federated Mdt
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vanguard and Federated is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Index and Federated Mdt Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Mdt 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 Federated Mdt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Mdt Small has no effect on the direction of Vanguard Small-cap i.e., Vanguard Small-cap and Federated Mdt go up and down completely randomly.
Pair Corralation between Vanguard Small-cap and Federated Mdt
Assuming the 90 days horizon Vanguard Small-cap is expected to generate 1.05 times less return on investment than Federated Mdt. But when comparing it to its historical volatility, Vanguard Small Cap Index is 1.18 times less risky than Federated Mdt. It trades about 0.11 of its potential returns per unit of risk. Federated Mdt Small is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 2,056 in Federated Mdt Small on September 2, 2024 and sell it today you would earn a total of 693.00 from holding Federated Mdt Small or generate 33.71% 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. Federated Mdt Small
Performance |
| Timeline |
| Vanguard Small Cap |
| Federated Mdt Small |
Vanguard Small-cap and Federated Mdt Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Small-cap and Federated Mdt
The main advantage of trading using opposite Vanguard Small-cap and Federated Mdt positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Small-cap position performs unexpectedly, Federated Mdt 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 Federated Mdt will offset losses from the drop in Federated Mdt's long position.| Vanguard Small-cap vs. Vanguard Strategic Small Cap | Vanguard Small-cap vs. Vanguard Emerging Markets | Vanguard Small-cap vs. Vanguard Diversified Equity | Vanguard Small-cap vs. Vanguard Mid Cap |
| Federated Mdt vs. Federated Mdt Small | Federated Mdt vs. Fidelity Advisor Large | Federated Mdt vs. Undiscovered Managers Behavioral |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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