Correlation Between Vanguard Small and Pacer Cash
Can any of the company-specific risk be diversified away by investing in both Vanguard Small and Pacer Cash 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 Pacer Cash into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Small Cap Value and Pacer Cash Cows, you can compare the effects of market volatilities on Vanguard Small and Pacer Cash 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 Pacer Cash. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small and Pacer Cash.
Diversification Opportunities for Vanguard Small and Pacer Cash
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vanguard and Pacer is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Value and Pacer Cash Cows in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacer Cash Cows 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 Value are associated (or correlated) with Pacer Cash. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacer Cash Cows has no effect on the direction of Vanguard Small i.e., Vanguard Small and Pacer Cash go up and down completely randomly.
Pair Corralation between Vanguard Small and Pacer Cash
Considering the 90-day investment horizon Vanguard Small Cap Value is expected to generate 1.13 times more return on investment than Pacer Cash. However, Vanguard Small is 1.13 times more volatile than Pacer Cash Cows. It trades about -0.37 of its potential returns per unit of risk. Pacer Cash Cows is currently generating about -0.42 per unit of risk. If you would invest 21,327 in Vanguard Small Cap Value on October 5, 2024 and sell it today you would lose (1,509) from holding Vanguard Small Cap Value or give up 7.08% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Vanguard Small Cap Value vs. Pacer Cash Cows
Performance |
Timeline |
Vanguard Small Cap |
Pacer Cash Cows |
Vanguard Small and Pacer Cash Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Vanguard Small and Pacer Cash
The main advantage of trading using opposite Vanguard Small and Pacer Cash positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Small position performs unexpectedly, Pacer Cash 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 Pacer Cash will offset losses from the drop in Pacer Cash's long position.Vanguard Small vs. Vanguard Mid Cap Value | Vanguard Small vs. Vanguard Small Cap Growth | Vanguard Small vs. Vanguard Value Index | Vanguard Small vs. Vanguard Small Cap Index |
Pacer Cash vs. Pacer Small Cap | Pacer Cash vs. Pacer Global Cash | Pacer Cash vs. Amplify CWP Enhanced | Pacer Cash vs. JPMorgan Nasdaq Equity |
Check out your portfolio center.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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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