Correlation Between Vanguard Small and Tuttle Capital

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

Diversification Opportunities for Vanguard Small and Tuttle Capital

-0.4

Correlation Coefficient

Vanguard Small  Tuttle Capital

Very good diversification

The 3 months correlation between Vanguard and Tuttle is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Index and Tuttle Capital Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tuttle Capital Short 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 Tuttle Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tuttle Capital Short has no effect on the direction of Vanguard Small i.e., Vanguard Small and Tuttle Capital go up and down completely randomly.

Pair Corralation between Vanguard Small and Tuttle Capital

Allowing for the 90-day total investment horizon Vanguard Small is expected to generate 9.27 times less return on investment than Tuttle Capital. But when comparing it to its historical volatility, Vanguard Small Cap Index is 25.05 times less risky than Tuttle Capital. It trades about 0.23 of its potential returns per unit of risk. Tuttle Capital Short is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  3,221  in Tuttle Capital Short on September 1, 2024 and sell it today you would earn a total of  1,656  from holding Tuttle Capital Short or generate 51.41% 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.  Tuttle Capital Short

Vanguard Small Cap

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Small Cap Index are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating fundamental drivers, Vanguard Small sustained solid returns over the last few months and may actually be approaching a breakup point.

Tuttle Capital Short

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tuttle Capital Short are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Tuttle Capital disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vanguard Small and Tuttle Capital

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

The idea behind Vanguard Small Cap Index and Tuttle Capital Short 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.