Correlation Between Vanguard and Vanguard Small

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Can any of the company-specific risk be diversified away by investing in both Vanguard 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 Vanguard and Vanguard Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard SP Small Cap and Vanguard Small Cap Index, you can compare the effects of market volatilities on Vanguard 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 Vanguard with a short position of Vanguard Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard and Vanguard Small.

Diversification Opportunities for Vanguard and Vanguard Small

0.99
  Correlation Coefficient

No risk reduction

The 3 months correlation between Vanguard and Vanguard is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard SP Small-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 Index and Vanguard 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 SP Small 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 Index has no effect on the direction of Vanguard i.e., Vanguard and Vanguard Small go up and down completely randomly.

Pair Corralation between Vanguard and Vanguard Small

Given the investment horizon of 90 days Vanguard SP Small Cap is expected to under-perform the Vanguard Small. In addition to that, Vanguard is 1.81 times more volatile than Vanguard Small Cap Index. It trades about -0.03 of its total potential returns per unit of risk. Vanguard Small Cap Index is currently generating about 0.01 per unit of volatility. If you would invest  20,536  in Vanguard Small Cap Index on November 24, 2023 and sell it today you would earn a total of  1,065  from holding Vanguard Small Cap Index or generate 5.19% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Vanguard SP Small-Cap  vs.  Vanguard Small-Cap Index

 Performance 
       Timeline  
Vanguard SP Small-Cap 

Risk-Adjusted Performance

11 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard SP Small Cap are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, Vanguard may actually be approaching a critical reversion point that can send shares even higher in March 2024.
Vanguard Small-Cap Index 

Risk-Adjusted Performance

12 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Small Cap Index are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal fundamental drivers, Vanguard Small may actually be approaching a critical reversion point that can send shares even higher in March 2024.

Vanguard and Vanguard Small Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Vanguard and Vanguard Small

The main advantage of trading using opposite Vanguard and Vanguard Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard 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.
The idea behind Vanguard SP Small Cap and Vanguard Small Cap Index pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.

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