Correlation Between Vanguard Total and Vela Small
Can any of the company-specific risk be diversified away by investing in both Vanguard Total and Vela Small 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 Total and Vela Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Total Stock and Vela Small Cap, you can compare the effects of market volatilities on Vanguard Total and Vela Small 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 Total with a short position of Vela Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Total and Vela Small.
Diversification Opportunities for Vanguard Total and Vela Small
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vanguard and Vela is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Stock and Vela Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vela Small Cap and Vanguard Total 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 Total Stock are associated (or correlated) with Vela Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vela Small Cap has no effect on the direction of Vanguard Total i.e., Vanguard Total and Vela Small go up and down completely randomly.
Pair Corralation between Vanguard Total and Vela Small
Assuming the 90 days horizon Vanguard Total is expected to generate 1.16 times less return on investment than Vela Small. But when comparing it to its historical volatility, Vanguard Total Stock is 1.39 times less risky than Vela Small. It trades about 0.2 of its potential returns per unit of risk. Vela Small Cap is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 1,942 in Vela Small Cap on August 28, 2024 and sell it today you would earn a total of 84.00 from holding Vela Small Cap or generate 4.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Vanguard Total Stock vs. Vela Small Cap
Performance |
| Timeline |
| Vanguard Total Stock |
| Vela Small Cap |
Vanguard Total and Vela Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Total and Vela Small
The main advantage of trading using opposite Vanguard Total and Vela Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Total position performs unexpectedly, Vela Small 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 Vela Small will offset losses from the drop in Vela Small's long position.| Vanguard Total vs. Massmutual Premier Diversified | Vanguard Total vs. Jhancock Diversified Macro | Vanguard Total vs. Fidelity Advisor Diversified | Vanguard Total vs. American Funds Conservative |
| Vela Small vs. Vela International | Vela Small vs. Vela International | Vela Small vs. Vela Large Cap | Vela Small vs. Vela Large 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 Transaction History module to view history of all your transactions and understand their impact on performance.
Other Complementary Tools
| Global Correlations Find global opportunities by holding instruments from different markets | |
| Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios | |
| Commodity Directory Find actively traded commodities issued by global exchanges | |
| Portfolio Anywhere Track or share privately all of your investments from the convenience of any device | |
| Content Syndication Quickly integrate customizable finance content to your own investment portal |