Correlation Between Vanguard Small-cap and Vanguard Total
Can any of the company-specific risk be diversified away by investing in both Vanguard Small-cap and Vanguard Total 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 Total 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 Total Bond, you can compare the effects of market volatilities on Vanguard Small-cap and Vanguard Total 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 Total. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small-cap and Vanguard Total.
Diversification Opportunities for Vanguard Small-cap and Vanguard Total
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Vanguard and Vanguard is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Index and Vanguard Total Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Total Bond 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 Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Total Bond has no effect on the direction of Vanguard Small-cap i.e., Vanguard Small-cap and Vanguard Total go up and down completely randomly.
Pair Corralation between Vanguard Small-cap and Vanguard Total
Assuming the 90 days horizon Vanguard Small Cap Index is expected to generate 3.18 times more return on investment than Vanguard Total. However, Vanguard Small-cap is 3.18 times more volatile than Vanguard Total Bond. It trades about 0.4 of its potential returns per unit of risk. Vanguard Total Bond is currently generating about 0.09 per unit of risk. If you would invest 11,289 in Vanguard Small Cap Index on September 1, 2024 and sell it today you would earn a total of 1,185 from holding Vanguard Small Cap Index or generate 10.5% 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 Total Bond
Performance |
| Timeline |
| Vanguard Small Cap |
| Vanguard Total Bond |
Vanguard Small-cap and Vanguard Total Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Small-cap and Vanguard Total
The main advantage of trading using opposite Vanguard Small-cap and Vanguard Total positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Small-cap position performs unexpectedly, Vanguard Total 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 Total will offset losses from the drop in Vanguard Total'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 Total vs. Calamos Dynamic Convertible | Vanguard Total vs. Putnam Convertible Incm Gwth | Vanguard Total vs. Columbia Vertible Securities | Vanguard Total vs. Absolute Convertible Arbitrage |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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