Correlation Between Vanguard Small-cap and Vanguard Intermediate-ter
Can any of the company-specific risk be diversified away by investing in both Vanguard Small-cap and Vanguard Intermediate-ter 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 Vanguard Intermediate-ter 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 Vanguard Intermediate Term Bond, you can compare the effects of market volatilities on Vanguard Small-cap and Vanguard Intermediate-ter 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 Vanguard Intermediate-ter. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small-cap and Vanguard Intermediate-ter.
Diversification Opportunities for Vanguard Small-cap and Vanguard Intermediate-ter
-0.72 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Vanguard and Vanguard is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Index and Vanguard Intermediate Term Bon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Intermediate-ter 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 Vanguard Intermediate-ter. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Intermediate-ter has no effect on the direction of Vanguard Small-cap i.e., Vanguard Small-cap and Vanguard Intermediate-ter go up and down completely randomly.
Pair Corralation between Vanguard Small-cap and Vanguard Intermediate-ter
Assuming the 90 days horizon Vanguard Small Cap Index is expected to generate 2.66 times more return on investment than Vanguard Intermediate-ter. However, Vanguard Small-cap is 2.66 times more volatile than Vanguard Intermediate Term Bond. It trades about 0.08 of its potential returns per unit of risk. Vanguard Intermediate Term Bond is currently generating about 0.04 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 Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Small Cap Index vs. Vanguard Intermediate Term Bon
Performance |
| Timeline |
| Vanguard Small Cap |
| Vanguard Intermediate-ter |
Vanguard Small-cap and Vanguard Intermediate-ter Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Small-cap and Vanguard Intermediate-ter
The main advantage of trading using opposite Vanguard Small-cap and Vanguard Intermediate-ter positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Small-cap position performs unexpectedly, Vanguard Intermediate-ter 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 Vanguard Intermediate-ter will offset losses from the drop in Vanguard Intermediate-ter'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 |
| Vanguard Intermediate-ter vs. Balanced Fund Retail | Vanguard Intermediate-ter vs. Ms Global Fixed | Vanguard Intermediate-ter vs. Huber Capital Equity | Vanguard Intermediate-ter vs. Calamos Global Equity |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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