Correlation Between Small Company and Vanguard Advice

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

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

Diversification Opportunities for Small Company and Vanguard Advice

0.12

Correlation Coefficient

Small Company  Vanguard Advice

Average diversification

The 3 months correlation between Small and Vanguard is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Small Pany Growth and Vanguard Advice Select in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Advice Select and Small Company 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 Small Pany Growth are associated (or correlated) with Vanguard Advice. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Advice Select has no effect on the direction of Small Company i.e., Small Company and Vanguard Advice go up and down completely randomly.

Pair Corralation between Small Company and Vanguard Advice

Assuming the 90 days horizon Small Pany Growth is expected to under-perform the Vanguard Advice. In addition to that, Small Company is 1.49 times more volatile than Vanguard Advice Select. It trades about -0.05 of its total potential returns per unit of risk. Vanguard Advice Select is currently generating about 0.1 per unit of volatility. If you would invest  2,014  in Vanguard Advice Select on November 29, 2024 and sell it today you would earn a total of  160.00  from holding Vanguard Advice Select or generate 7.94% return on investment over 90 days.

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

Small Pany Growth  vs.  Vanguard Advice Select

Small Pany Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Small Pany Growth has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Vanguard Advice Select

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Advice Select are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Vanguard Advice may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Small Company and Vanguard Advice

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

The idea behind Small Pany Growth and Vanguard Advice Select 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.