Correlation Between Vanguard Small and Vanguard Funds

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

Diversification Opportunities for Vanguard Small and Vanguard Funds

-0.8

Correlation Coefficient

Vanguard Small  Vanguard Funds

Pay attention - limited upside

The 3 months correlation between Vanguard and Vanguard is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Index and Vanguard Funds Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Funds Public 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 Vanguard Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Funds Public has no effect on the direction of Vanguard Small i.e., Vanguard Small and Vanguard Funds go up and down completely randomly.

Pair Corralation between Vanguard Small and Vanguard Funds

Allowing for the 90-day total investment horizon Vanguard Small Cap Index is expected to generate 1.18 times more return on investment than Vanguard Funds. However, Vanguard Small is 1.18 times more volatile than Vanguard Funds Public. It trades about 0.07 of its potential returns per unit of risk. Vanguard Funds Public is currently generating about 0.06 per unit of risk. If you would invest  17,522  in Vanguard Small Cap Index on September 18, 2024 and sell it today you would earn a total of  7,652  from holding Vanguard Small Cap Index or generate 43.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	99.19%
Values	Daily Returns

Vanguard Small Cap Index  vs.  Vanguard Funds Public

Vanguard Small Cap

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Small Cap Index are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating fundamental drivers, Vanguard Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Vanguard Funds Public

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Vanguard Small and Vanguard Funds

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

The idea behind Vanguard Small Cap Index and Vanguard Funds Public 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.