Correlation Between Vanguard and Ballast SmallMid

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

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

Diversification Opportunities for Vanguard and Ballast SmallMid

0.97

Correlation Coefficient

Vanguard  Ballast SmallMid

Almost no diversification

The 3 months correlation between Vanguard and Ballast is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard SP Small Cap and Ballast SmallMid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ballast SmallMid Cap and Vanguard 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 SP Small Cap are associated (or correlated) with Ballast SmallMid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ballast SmallMid Cap has no effect on the direction of Vanguard i.e., Vanguard and Ballast SmallMid go up and down completely randomly.

Pair Corralation between Vanguard and Ballast SmallMid

Given the investment horizon of 90 days Vanguard is expected to generate 1.51 times less return on investment than Ballast SmallMid. In addition to that, Vanguard is 1.02 times more volatile than Ballast SmallMid Cap. It trades about 0.15 of its total potential returns per unit of risk. Ballast SmallMid Cap is currently generating about 0.23 per unit of volatility. If you would invest  3,692  in Ballast SmallMid Cap on September 3, 2024 and sell it today you would earn a total of  713.00  from holding Ballast SmallMid Cap or generate 19.31% return on investment over 90 days.

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

Vanguard SP Small Cap  vs.  Ballast SmallMid Cap

Vanguard SP Small

Risk-Adjusted Performance

11 of 100

Good

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

Ballast SmallMid Cap

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ballast SmallMid Cap are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting primary indicators, Ballast SmallMid unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vanguard and Ballast SmallMid

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

The idea behind Vanguard SP Small Cap and Ballast SmallMid Cap 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.