Correlation Between Vanguard Small and Timothy Plan

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

Diversification Opportunities for Vanguard Small and Timothy Plan

0.99

Correlation Coefficient

Vanguard Small  Timothy Plan

No risk reduction

The 3 months correlation between Vanguard and Timothy is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Index and Timothy Plan Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Timothy Plan Small 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 Timothy Plan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Timothy Plan Small has no effect on the direction of Vanguard Small i.e., Vanguard Small and Timothy Plan go up and down completely randomly.

Pair Corralation between Vanguard Small and Timothy Plan

Allowing for the 90-day total investment horizon Vanguard Small Cap Index is expected to generate 0.79 times more return on investment than Timothy Plan. However, Vanguard Small Cap Index is 1.27 times less risky than Timothy Plan. It trades about 0.23 of its potential returns per unit of risk. Timothy Plan Small is currently generating about 0.16 per unit of risk. If you would invest  22,672  in Vanguard Small Cap Index on September 2, 2024 and sell it today you would earn a total of  3,379  from holding Vanguard Small Cap Index or generate 14.9% return on investment over 90 days.

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

Vanguard Small Cap Index  vs.  Timothy Plan Small

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.

Timothy Plan Small

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Timothy Plan Small are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Timothy Plan may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Vanguard Small and Timothy Plan

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

The idea behind Vanguard Small Cap Index and Timothy Plan Small 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.