Correlation Between Vanguard Small-cap and Guidepath(r) Flexible

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

Diversification Opportunities for Vanguard Small-cap and Guidepath(r) Flexible

0.71

Correlation Coefficient

Vanguard Small-cap  Guidepath(r) Flexible

Poor diversification

The 3 months correlation between Vanguard and Guidepath(r) is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Value and Guidepath Flexible Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guidepath Flexible Income 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 Value are associated (or correlated) with Guidepath(r) Flexible. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guidepath Flexible Income has no effect on the direction of Vanguard Small-cap i.e., Vanguard Small-cap and Guidepath(r) Flexible go up and down completely randomly.

Pair Corralation between Vanguard Small-cap and Guidepath(r) Flexible

Assuming the 90 days horizon Vanguard Small Cap Value is expected to generate 3.93 times more return on investment than Guidepath(r) Flexible. However, Vanguard Small-cap is 3.93 times more volatile than Guidepath Flexible Income. It trades about 0.04 of its potential returns per unit of risk. Guidepath Flexible Income is currently generating about 0.05 per unit of risk. If you would invest  3,863  in Vanguard Small Cap Value on October 11, 2024 and sell it today you would earn a total of  896.00  from holding Vanguard Small Cap Value or generate 23.19% return on investment over 90 days.

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

Vanguard Small Cap Value  vs.  Guidepath Flexible Income

Vanguard Small Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Small Cap Value has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Vanguard Small-cap is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Guidepath Flexible Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Guidepath Flexible Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Guidepath(r) Flexible 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-cap and Guidepath(r) Flexible

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

The idea behind Vanguard Small Cap Value and Guidepath Flexible Income 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.