Correlation Between Vanguard Small and Stone Ridge

Can any of the company-specific risk be diversified away by investing in both Vanguard Small and Stone Ridge 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 Stone Ridge 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 Stone Ridge 2057, you can compare the effects of market volatilities on Vanguard Small and Stone Ridge 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 Stone Ridge. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small and Stone Ridge.

Diversification Opportunities for Vanguard Small and Stone Ridge

-0.58

Correlation Coefficient

Vanguard Small  Stone Ridge

Excellent diversification

The 3 months correlation between Vanguard and Stone is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Index and Stone Ridge 2057 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stone Ridge 2057 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 Stone Ridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stone Ridge 2057 has no effect on the direction of Vanguard Small i.e., Vanguard Small and Stone Ridge go up and down completely randomly.

Pair Corralation between Vanguard Small and Stone Ridge

Allowing for the 90-day total investment horizon Vanguard Small Cap Index is expected to under-perform the Stone Ridge. In addition to that, Vanguard Small is 1.91 times more volatile than Stone Ridge 2057. It trades about -0.11 of its total potential returns per unit of risk. Stone Ridge 2057 is currently generating about 0.06 per unit of volatility. If you would invest  15,427  in Stone Ridge 2057 on December 28, 2024 and sell it today you would earn a total of  347.00  from holding Stone Ridge 2057 or generate 2.25% return on investment over 90 days.

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

Vanguard Small Cap Index  vs.  Stone Ridge 2057

Vanguard Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Small Cap Index has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Etf's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

Stone Ridge 2057

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Stone Ridge 2057 are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Stone Ridge is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Vanguard Small and Stone Ridge

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

The idea behind Vanguard Small Cap Index and Stone Ridge 2057 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.