Correlation Between Vanguard Small and Syntax

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

Diversification Opportunities for Vanguard Small and Syntax

0.06

Correlation Coefficient

Vanguard Small  Syntax

Significant diversification

The 3 months correlation between Vanguard and Syntax is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Growth and Syntax in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Syntax 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 Syntax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Syntax has no effect on the direction of Vanguard Small i.e., Vanguard Small and Syntax go up and down completely randomly.

Pair Corralation between Vanguard Small and Syntax

Considering the 90-day investment horizon Vanguard Small Cap Growth is expected to generate 1.13 times more return on investment than Syntax. However, Vanguard Small is 1.13 times more volatile than Syntax. It trades about 0.06 of its potential returns per unit of risk. Syntax is currently generating about 0.05 per unit of risk. If you would invest  21,591  in Vanguard Small Cap Growth on October 21, 2024 and sell it today you would earn a total of  7,410  from holding Vanguard Small Cap Growth or generate 34.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	84.68%
Values	Daily Returns

Vanguard Small Cap Growth  vs.  Syntax

Vanguard Small Cap

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Small Cap Growth are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain fundamental drivers, Vanguard Small may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Syntax

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Syntax has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, Syntax is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vanguard Small and Syntax

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

The idea behind Vanguard Small Cap Growth and Syntax 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.