Correlation Between Vanguard Small-cap and Performance Trust

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

Diversification Opportunities for Vanguard Small-cap and Performance Trust

0.27

Correlation Coefficient

Vanguard Small-cap  Performance Trust

Modest diversification

The 3 months correlation between Vanguard and Performance is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Value and Performance Trust Strategic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Performance Trust 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 Performance Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Performance Trust has no effect on the direction of Vanguard Small-cap i.e., Vanguard Small-cap and Performance Trust go up and down completely randomly.

Pair Corralation between Vanguard Small-cap and Performance Trust

Assuming the 90 days horizon Vanguard Small Cap Value is expected to under-perform the Performance Trust. In addition to that, Vanguard Small-cap is 4.02 times more volatile than Performance Trust Strategic. It trades about -0.29 of its total potential returns per unit of risk. Performance Trust Strategic is currently generating about -0.54 per unit of volatility. If you would invest  1,995  in Performance Trust Strategic on October 9, 2024 and sell it today you would lose (53.00) from holding Performance Trust Strategic or give up 2.66% of portfolio value over 90 days.

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

Vanguard Small Cap Value  vs.  Performance Trust Strategic

Vanguard Small Cap

Risk-Adjusted Performance

0 of 100

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.

Performance Trust

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Vanguard Small Cap Value and Performance Trust Strategic 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.