Correlation Between Vanguard Small and ETFS Commodity

Can any of the company-specific risk be diversified away by investing in both Vanguard Small and ETFS Commodity 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 ETFS Commodity 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 ETFS Commodity Securities, you can compare the effects of market volatilities on Vanguard Small and ETFS Commodity 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 ETFS Commodity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small and ETFS Commodity.

Diversification Opportunities for Vanguard Small and ETFS Commodity

0.27

Correlation Coefficient

Vanguard Small  ETFS Commodity

Modest diversification

The 3 months correlation between Vanguard and ETFS is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Index and ETFS Commodity Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETFS Commodity Securities 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 ETFS Commodity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETFS Commodity Securities has no effect on the direction of Vanguard Small i.e., Vanguard Small and ETFS Commodity go up and down completely randomly.

Pair Corralation between Vanguard Small and ETFS Commodity

Allowing for the 90-day total investment horizon Vanguard Small is expected to generate 20.14 times less return on investment than ETFS Commodity. But when comparing it to its historical volatility, Vanguard Small Cap Index is 5.3 times less risky than ETFS Commodity. It trades about 0.08 of its potential returns per unit of risk. ETFS Commodity Securities is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  3,656  in ETFS Commodity Securities on October 20, 2024 and sell it today you would earn a total of  529.00  from holding ETFS Commodity Securities or generate 14.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	3.61%
Values	Daily Returns

Vanguard Small Cap Index  vs.  ETFS Commodity Securities

Vanguard Small Cap

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Small Cap Index are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, Vanguard Small is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

ETFS Commodity Securities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ETFS Commodity Securities has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, ETFS Commodity is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Vanguard Small and ETFS Commodity

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

The idea behind Vanguard Small Cap Index and ETFS Commodity Securities 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.