Correlation Between PBSM and Vanguard Small
Can any of the company-specific risk be diversified away by investing in both PBSM 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 PBSM and Vanguard Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PBSM and Vanguard Small Cap Index, you can compare the effects of market volatilities on PBSM 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 PBSM with a short position of Vanguard Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of PBSM and Vanguard Small.
Diversification Opportunities for PBSM and Vanguard Small
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between PBSM and Vanguard is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding PBSM 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 PBSM 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 PBSM 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 PBSM i.e., PBSM and Vanguard Small go up and down completely randomly.
Pair Corralation between PBSM and Vanguard Small
Given the investment horizon of 90 days PBSM is expected to under-perform the Vanguard Small. But the etf apears to be less risky and, when comparing its historical volatility, PBSM is 1.38 times less risky than Vanguard Small. The etf trades about -0.04 of its potential returns per unit of risk. The Vanguard Small Cap Index is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 18,444 in Vanguard Small Cap Index on January 26, 2024 and sell it today you would earn a total of 3,204 from holding Vanguard Small Cap Index or generate 17.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 18.07% |
| Values | Daily Returns |
PBSM vs. Vanguard Small Cap Index
Performance |
| Timeline |
| PBSM |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Vanguard Small Cap |
PBSM and Vanguard Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PBSM and Vanguard Small
The main advantage of trading using opposite PBSM and Vanguard Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PBSM 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.| PBSM vs. OShares Quality Dividend | PBSM vs. OShares Europe Quality | PBSM vs. OShares Global Internet | PBSM vs. ProShares SP MidCap |
| Vanguard Small vs. OShares Quality Dividend | Vanguard Small vs. OShares Europe Quality | Vanguard Small vs. OShares Global Internet | Vanguard Small vs. ProShares SP MidCap |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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