Correlation Between Vanguard Small-cap and Oklahoma Municipal

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

Diversification Opportunities for Vanguard Small-cap and Oklahoma Municipal

0.09

Correlation Coefficient

Vanguard Small-cap  Oklahoma Municipal

Significant diversification

The 3 months correlation between Vanguard and Oklahoma is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Value and Oklahoma Municipal Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oklahoma Municipal 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 Oklahoma Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oklahoma Municipal has no effect on the direction of Vanguard Small-cap i.e., Vanguard Small-cap and Oklahoma Municipal go up and down completely randomly.

Pair Corralation between Vanguard Small-cap and Oklahoma Municipal

Assuming the 90 days horizon Vanguard Small Cap Value is expected to under-perform the Oklahoma Municipal. In addition to that, Vanguard Small-cap is 3.57 times more volatile than Oklahoma Municipal Fund. It trades about -0.19 of its total potential returns per unit of risk. Oklahoma Municipal Fund is currently generating about -0.04 per unit of volatility. If you would invest  1,063  in Oklahoma Municipal Fund on December 4, 2024 and sell it today you would lose (7.00) from holding Oklahoma Municipal Fund or give up 0.66% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Vanguard Small Cap Value  vs.  Oklahoma Municipal Fund

Vanguard Small Cap

Risk-Adjusted Performance

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 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.

Oklahoma Municipal

Risk-Adjusted Performance

Very Weak

Over the last 90 days Oklahoma Municipal Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Oklahoma Municipal 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 Oklahoma Municipal

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

The idea behind Vanguard Small Cap Value and Oklahoma Municipal 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.