Correlation Between Vanguard Small and Vanguard Growth
Can any of the company-specific risk be diversified away by investing in both Vanguard Small and Vanguard Growth 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 Small and Vanguard Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Small Cap Index and Vanguard Growth Index, you can compare the effects of market volatilities on Vanguard Small and Vanguard Growth 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 Small with a short position of Vanguard Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small and Vanguard Growth.
Diversification Opportunities for Vanguard Small and Vanguard Growth
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Vanguard and Vanguard is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Index and Vanguard Growth Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Growth Index and Vanguard Small 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 Small Cap Index are associated (or correlated) with Vanguard Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Growth Index has no effect on the direction of Vanguard Small i.e., Vanguard Small and Vanguard Growth go up and down completely randomly.
Pair Corralation between Vanguard Small and Vanguard Growth
Allowing for the 90-day total investment horizon Vanguard Small is expected to generate 1.65 times less return on investment than Vanguard Growth. But when comparing it to its historical volatility, Vanguard Small Cap Index is 1.04 times less risky than Vanguard Growth. It trades about 0.04 of its potential returns per unit of risk. Vanguard Growth Index is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 22,627 in Vanguard Growth Index on January 25, 2024 and sell it today you would earn a total of 10,480 from holding Vanguard Growth Index or generate 46.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.78% |
| Values | Daily Returns |
Vanguard Small Cap Index vs. Vanguard Growth Index
Performance |
| Timeline |
| Vanguard Small Cap |
| Vanguard Growth Index |
Vanguard Small and Vanguard Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Small and Vanguard Growth
The main advantage of trading using opposite Vanguard Small and Vanguard Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Small position performs unexpectedly, Vanguard Growth 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 Growth will offset losses from the drop in Vanguard Growth's long position.| Vanguard Small vs. OShares Quality Dividend | Vanguard Small vs. OShares Europe Quality | Vanguard Small vs. OShares Global Internet | Vanguard Small vs. ProShares SP MidCap |
| Vanguard Growth vs. iShares Small Cap | Vanguard Growth vs. Pacer Cash Cows | Vanguard Growth vs. GXO Logistics | Vanguard Growth vs. Amplify CWP Enhanced |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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