Correlation Between Walden Smid and Vanguard Small
Can any of the company-specific risk be diversified away by investing in both Walden Smid and Vanguard 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 Walden Smid and Vanguard Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walden Smid Cap and Vanguard Small Cap Index, you can compare the effects of market volatilities on Walden Smid and Vanguard 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 Walden Smid with a short position of Vanguard Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walden Smid and Vanguard Small.
Diversification Opportunities for Walden Smid and Vanguard Small
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Walden and Vanguard is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Walden Smid Cap and Vanguard Small Cap Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Small Cap and Walden Smid 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 Walden Smid Cap are associated (or correlated) with Vanguard Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Small Cap has no effect on the direction of Walden Smid i.e., Walden Smid and Vanguard Small go up and down completely randomly.
Pair Corralation between Walden Smid and Vanguard Small
Assuming the 90 days horizon Walden Smid is expected to generate 1.35 times less return on investment than Vanguard Small. But when comparing it to its historical volatility, Walden Smid Cap is 1.17 times less risky than Vanguard Small. It trades about 0.2 of its potential returns per unit of risk. Vanguard Small Cap Index is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 10,861 in Vanguard Small Cap Index on September 3, 2024 and sell it today you would earn a total of 1,613 from holding Vanguard Small Cap Index or generate 14.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Walden Smid Cap vs. Vanguard Small Cap Index
Performance |
| Timeline |
| Walden Smid Cap |
| Vanguard Small Cap |
Walden Smid and Vanguard Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Walden Smid and Vanguard Small
The main advantage of trading using opposite Walden Smid and Vanguard Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walden Smid position performs unexpectedly, Vanguard 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 Vanguard Small will offset losses from the drop in Vanguard Small's long position.| Walden Smid vs. Walden Midcap Fund | Walden Smid vs. Calvert Small Cap | Walden Smid vs. Calvert International Equity | Walden Smid vs. Champlain Mid Cap |
| Vanguard Small vs. Vanguard Mid Cap Index | Vanguard Small vs. Vanguard Total Bond | Vanguard Small vs. Vanguard Institutional Index | Vanguard Small vs. Vanguard Total International |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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