Correlation Between Vanguard Total and Small-cap Value

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

By analyzing existing cross correlation between Vanguard Total International and Small Cap Value Fund, you can compare the effects of market volatilities on Vanguard Total and Small-cap Value 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 Total with a short position of Small-cap Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Total and Small-cap Value.

Diversification Opportunities for Vanguard Total and Small-cap Value

0.24

Correlation Coefficient

Vanguard Total  Small-cap Value

Modest diversification

The 3 months correlation between Vanguard and Small-cap is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total International and Small Cap Value Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Value and Vanguard Total 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 Total International are associated (or correlated) with Small-cap Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Value has no effect on the direction of Vanguard Total i.e., Vanguard Total and Small-cap Value go up and down completely randomly.

Pair Corralation between Vanguard Total and Small-cap Value

Assuming the 90 days horizon Vanguard Total International is expected to under-perform the Small-cap Value. But the mutual fund apears to be less risky and, when comparing its historical volatility, Vanguard Total International is 2.36 times less risky than Small-cap Value. The mutual fund trades about -0.21 of its potential returns per unit of risk. The Small Cap Value Fund is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  4,002  in Small Cap Value Fund on October 5, 2024 and sell it today you would lose (268.00) from holding Small Cap Value Fund or give up 6.7% of portfolio value over 90 days.

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

Vanguard Total International  vs.  Small Cap Value Fund

Vanguard Total Inter

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Total International has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Small Cap Value

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Small Cap Value Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Vanguard Total and Small-cap Value

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

The idea behind Vanguard Total International and Small Cap Value Fund 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.