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
Pair Corralation between Vanguard and Vanguard Small
Given the investment horizon of 90 days Vanguard is expected to generate 1.3 times less return on investment than Vanguard Small. In addition to that, Vanguard is 1.24 times more volatile than Vanguard Small Cap Index. It trades about 0.1 of its total potential returns per unit of risk. Vanguard Small Cap Index is currently generating about 0.16 per unit of volatility. If you would invest 19,234 in Vanguard Small Cap Index on November 24, 2023 and sell it today you would earn a total of 2,141 from holding Vanguard Small Cap Index or generate 11.13% return on investment over 90 days.
Vanguard SP Small-Cap vs. Vanguard Small-Cap Index
Vanguard and Vanguard Small Volatility Contrast
Pair Trading with Vanguard and Vanguard SmallThe 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.
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
Other Complementary Tools
Avoid under-diversification and over-optimization by backtesting your portfolios
Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope
Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets
Analyze current equity momentum using Aroon Oscillator and other momentum ratios
Use basic forecasting models to generate price predictions and determine price momentum
|Odds Of Bankruptcy
Get analysis of equity chance of financial distress in the next 2 years