Correlation Between Vanguard Small and Columbia Emerging

Can any of the company-specific risk be diversified away by investing in both Vanguard Small and Columbia Emerging 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 Columbia Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Vanguard Small Cap Growth and Columbia Emerging Markets, you can compare the effects of market volatilities on Vanguard Small and Columbia Emerging 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 Columbia Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small and Columbia Emerging.

Diversification Opportunities for Vanguard Small and Columbia Emerging

-0.71

Correlation Coefficient

Vanguard Small  Columbia Emerging

Pay attention - limited upside

The 3 months correlation between Vanguard and Columbia is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Growth and Columbia Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Emerging Markets 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 Growth are associated (or correlated) with Columbia Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Emerging Markets has no effect on the direction of Vanguard Small i.e., Vanguard Small and Columbia Emerging go up and down completely randomly.

Pair Corralation between Vanguard Small and Columbia Emerging

Considering the 90-day investment horizon Vanguard Small Cap Growth is expected to under-perform the Columbia Emerging. In addition to that, Vanguard Small is 1.5 times more volatile than Columbia Emerging Markets. It trades about -0.26 of its total potential returns per unit of risk. Columbia Emerging Markets is currently generating about -0.09 per unit of volatility. If you would invest  2,109  in Columbia Emerging Markets on October 4, 2024 and sell it today you would lose (34.00) from holding Columbia Emerging Markets or give up 1.61% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Vanguard Small Cap Growth  vs.  Columbia Emerging Markets

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 Growth are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental drivers, Vanguard Small is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Columbia Emerging Markets

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Columbia Emerging Markets has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

Pair Trading with Vanguard Small and Columbia Emerging

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

The idea behind Vanguard Small Cap Growth and Columbia Emerging Markets 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.