Correlation Between Vanguard Small-cap and Columbia Seligman

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

Diversification Opportunities for Vanguard Small-cap and Columbia Seligman

0.98

Correlation Coefficient

Vanguard Small-cap  Columbia Seligman

Almost no diversification

The 3 months correlation between Vanguard and Columbia is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Growth and Columbia Seligman Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Seligman Global and Vanguard Small-cap 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 Seligman. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Seligman Global has no effect on the direction of Vanguard Small-cap i.e., Vanguard Small-cap and Columbia Seligman go up and down completely randomly.

Pair Corralation between Vanguard Small-cap and Columbia Seligman

Assuming the 90 days horizon Vanguard Small Cap Growth is expected to generate 0.81 times more return on investment than Columbia Seligman. However, Vanguard Small Cap Growth is 1.23 times less risky than Columbia Seligman. It trades about -0.11 of its potential returns per unit of risk. Columbia Seligman Global is currently generating about -0.12 per unit of risk. If you would invest  7,884  in Vanguard Small Cap Growth on December 30, 2024 and sell it today you would lose (770.00) from holding Vanguard Small Cap Growth or give up 9.77% 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 Growth  vs.  Columbia Seligman Global

Vanguard Small Cap

Risk-Adjusted Performance

Very Weak

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

Columbia Seligman Global

Risk-Adjusted Performance

Very Weak

Over the last 90 days Columbia Seligman Global has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Vanguard Small-cap and Columbia Seligman

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

The idea behind Vanguard Small Cap Growth and Columbia Seligman Global 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.