Correlation Between Avantis Small and Vanguard Scottsdale

Can any of the company-specific risk be diversified away by investing in both Avantis Small and Vanguard Scottsdale 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 Avantis Small and Vanguard Scottsdale into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Avantis Small Cap and Vanguard Scottsdale Funds, you can compare the effects of market volatilities on Avantis Small and Vanguard Scottsdale 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 Avantis Small with a short position of Vanguard Scottsdale. Check out your portfolio center. Please also check ongoing floating volatility patterns of Avantis Small and Vanguard Scottsdale.

Diversification Opportunities for Avantis Small and Vanguard Scottsdale

0.98

Correlation Coefficient

Avantis Small  Vanguard Scottsdale

Almost no diversification

The 3 months correlation between Avantis and Vanguard is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Avantis Small Cap and Vanguard Scottsdale Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Scottsdale Funds and Avantis 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 Avantis Small Cap are associated (or correlated) with Vanguard Scottsdale. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Scottsdale Funds has no effect on the direction of Avantis Small i.e., Avantis Small and Vanguard Scottsdale go up and down completely randomly.

Pair Corralation between Avantis Small and Vanguard Scottsdale

Given the investment horizon of 90 days Avantis Small Cap is expected to under-perform the Vanguard Scottsdale. In addition to that, Avantis Small is 1.01 times more volatile than Vanguard Scottsdale Funds. It trades about -0.13 of its total potential returns per unit of risk. Vanguard Scottsdale Funds is currently generating about -0.11 per unit of volatility. If you would invest  28,430  in Vanguard Scottsdale Funds on December 30, 2024 and sell it today you would lose (2,145) from holding Vanguard Scottsdale Funds or give up 7.54% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Avantis Small Cap  vs.  Vanguard Scottsdale Funds

Avantis Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Avantis Small Cap has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Etf's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the fund sophisticated investors.

Vanguard Scottsdale Funds

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Scottsdale Funds has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Etf's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

Pair Trading with Avantis Small and Vanguard Scottsdale

The main advantage of trading using opposite Avantis Small and Vanguard Scottsdale positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avantis Small position performs unexpectedly, Vanguard Scottsdale 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 Scottsdale will offset losses from the drop in Vanguard Scottsdale's long position.

The idea behind Avantis Small Cap and Vanguard Scottsdale Funds 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.