Correlation Between Vanguard Wellesley and Small Cap
Can any of the company-specific risk be diversified away by investing in both Vanguard Wellesley and Small Cap 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 Wellesley and Small Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Wellesley Income and Small Cap Core, you can compare the effects of market volatilities on Vanguard Wellesley and Small Cap 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 Wellesley with a short position of Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Wellesley and Small Cap.
Diversification Opportunities for Vanguard Wellesley and Small Cap
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Vanguard and Small is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Wellesley Income and Small Cap Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Core and Vanguard Wellesley 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 Wellesley Income are associated (or correlated) with Small Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Core has no effect on the direction of Vanguard Wellesley i.e., Vanguard Wellesley and Small Cap go up and down completely randomly.
Pair Corralation between Vanguard Wellesley and Small Cap
Assuming the 90 days horizon Vanguard Wellesley Income is expected to generate 0.3 times more return on investment than Small Cap. However, Vanguard Wellesley Income is 3.34 times less risky than Small Cap. It trades about -0.13 of its potential returns per unit of risk. Small Cap Core is currently generating about -0.13 per unit of risk. If you would invest 6,130 in Vanguard Wellesley Income on January 19, 2025 and sell it today you would lose (161.00) from holding Vanguard Wellesley Income or give up 2.63% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Wellesley Income vs. Small Cap Core
Performance |
| Timeline |
| Vanguard Wellesley Income |
| Small Cap Core |
Vanguard Wellesley and Small Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Wellesley and Small Cap
The main advantage of trading using opposite Vanguard Wellesley and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Wellesley position performs unexpectedly, Small Cap 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 Cap will offset losses from the drop in Small Cap's long position.| Vanguard Wellesley vs. Vanguard Wellington Fund | Vanguard Wellesley vs. Vanguard Balanced Index | Vanguard Wellesley vs. Vanguard Wellesley Income | Vanguard Wellesley vs. Vanguard Dividend Growth |
| Small Cap vs. Angel Oak Ultrashort | Small Cap vs. Rbc Short Duration | Small Cap vs. Transam Short Term Bond | Small Cap vs. Prudential Short Term Porate |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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