Correlation Between Vanguard Strategic and Small Capitalization
Can any of the company-specific risk be diversified away by investing in both Vanguard Strategic and Small Capitalization 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 Strategic and Small Capitalization into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Strategic Small Cap and Small Capitalization Portfolio, you can compare the effects of market volatilities on Vanguard Strategic and Small Capitalization 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 Strategic with a short position of Small Capitalization. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Strategic and Small Capitalization.
Diversification Opportunities for Vanguard Strategic and Small Capitalization
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Vanguard and Small is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Strategic Small Cap and Small Capitalization Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Capitalization and Vanguard Strategic 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 Strategic Small Cap are associated (or correlated) with Small Capitalization. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Capitalization has no effect on the direction of Vanguard Strategic i.e., Vanguard Strategic and Small Capitalization go up and down completely randomly.
Pair Corralation between Vanguard Strategic and Small Capitalization
Assuming the 90 days horizon Vanguard Strategic Small Cap is expected to generate 0.59 times more return on investment than Small Capitalization. However, Vanguard Strategic Small Cap is 1.69 times less risky than Small Capitalization. It trades about -0.27 of its potential returns per unit of risk. Small Capitalization Portfolio is currently generating about -0.21 per unit of risk. If you would invest 4,114 in Vanguard Strategic Small Cap on December 1, 2024 and sell it today you would lose (248.00) from holding Vanguard Strategic Small Cap or give up 6.03% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Strategic Small Cap vs. Small Capitalization Portfolio
Performance |
| Timeline |
| Vanguard Strategic |
| Small Capitalization |
Vanguard Strategic and Small Capitalization Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Strategic and Small Capitalization
The main advantage of trading using opposite Vanguard Strategic and Small Capitalization positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Strategic position performs unexpectedly, Small Capitalization 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 Small Capitalization will offset losses from the drop in Small Capitalization's long position.| Vanguard Strategic vs. Vanguard Explorer Value | Vanguard Strategic vs. Vanguard Strategic Equity | Vanguard Strategic vs. Vanguard Diversified Equity | Vanguard Strategic vs. Vanguard Mid Cap |
| Small Capitalization vs. Blackrock Health Sciences | Small Capitalization vs. Health Care Ultrasector | Small Capitalization vs. Health Care Fund | Small Capitalization vs. Lord Abbett Health |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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