Correlation Between Vanguard Small-cap and Teton Westwood
Can any of the company-specific risk be diversified away by investing in both Vanguard Small-cap and Teton Westwood 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 Teton Westwood 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 Teton Westwood Small, you can compare the effects of market volatilities on Vanguard Small-cap and Teton Westwood 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 Teton Westwood. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small-cap and Teton Westwood.
Diversification Opportunities for Vanguard Small-cap and Teton Westwood
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Vanguard and Teton is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Index and Teton Westwood Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teton Westwood 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 Teton Westwood. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teton Westwood Small has no effect on the direction of Vanguard Small-cap i.e., Vanguard Small-cap and Teton Westwood go up and down completely randomly.
Pair Corralation between Vanguard Small-cap and Teton Westwood
Assuming the 90 days horizon Vanguard Small Cap Index is expected to generate 0.92 times more return on investment than Teton Westwood. However, Vanguard Small Cap Index is 1.08 times less risky than Teton Westwood. It trades about 0.06 of its potential returns per unit of risk. Teton Westwood Small is currently generating about 0.05 per unit of risk. If you would invest 8,879 in Vanguard Small Cap Index on August 24, 2024 and sell it today you would earn a total of 3,087 from holding Vanguard Small Cap Index or generate 34.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Small Cap Index vs. Teton Westwood Small
Performance |
| Timeline |
| Vanguard Small Cap |
| Teton Westwood Small |
Vanguard Small-cap and Teton Westwood Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Small-cap and Teton Westwood
The main advantage of trading using opposite Vanguard Small-cap and Teton Westwood positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Small-cap position performs unexpectedly, Teton Westwood 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 Teton Westwood will offset losses from the drop in Teton Westwood'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 |
| Teton Westwood vs. Vanguard Small Cap Index | Teton Westwood vs. Vanguard Small Cap Index | Teton Westwood vs. Vanguard Small Cap Index | Teton Westwood vs. Fidelity Small Cap |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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