Correlation Between Vanguard Windsor and Small Cap
Can any of the company-specific risk be diversified away by investing in both Vanguard Windsor 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 Windsor 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 Windsor Fund and Small Cap Growth, you can compare the effects of market volatilities on Vanguard Windsor 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 Windsor with a short position of Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Windsor and Small Cap.
Diversification Opportunities for Vanguard Windsor and Small Cap
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vanguard and Small is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Windsor Fund and Small Cap Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Growth and Vanguard Windsor 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 Windsor Fund 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 Growth has no effect on the direction of Vanguard Windsor i.e., Vanguard Windsor and Small Cap go up and down completely randomly.
Pair Corralation between Vanguard Windsor and Small Cap
Assuming the 90 days horizon Vanguard Windsor is expected to generate 1.3 times less return on investment than Small Cap. But when comparing it to its historical volatility, Vanguard Windsor Fund is 1.58 times less risky than Small Cap. It trades about 0.09 of its potential returns per unit of risk. Small Cap Growth is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1,738 in Small Cap Growth on September 12, 2024 and sell it today you would earn a total of 523.00 from holding Small Cap Growth or generate 30.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Windsor Fund vs. Small Cap Growth
Performance |
| Timeline |
| Vanguard Windsor |
| Small Cap Growth |
Vanguard Windsor and Small Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Windsor and Small Cap
The main advantage of trading using opposite Vanguard Windsor and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Windsor 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 Windsor vs. Vanguard Explorer Fund | Vanguard Windsor vs. Vanguard Primecap Fund | Vanguard Windsor vs. Vanguard Wellington Fund | Vanguard Windsor vs. Vanguard Windsor Ii |
| Small Cap vs. Third Avenue Real | Small Cap vs. Aegis Value Fund | Small Cap vs. Litman Gregory Masters | Small Cap vs. Marsico Growth Fund |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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