Correlation Between Vanguard Small-cap and Allianzgi Technology

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

Diversification Opportunities for Vanguard Small-cap and Allianzgi Technology

0.45

Correlation Coefficient

Vanguard Small-cap  Allianzgi Technology

Very weak diversification

The 3 months correlation between Vanguard and Allianzgi is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Value and Allianzgi Technology Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allianzgi Technology 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 Allianzgi Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allianzgi Technology has no effect on the direction of Vanguard Small-cap i.e., Vanguard Small-cap and Allianzgi Technology go up and down completely randomly.

Pair Corralation between Vanguard Small-cap and Allianzgi Technology

Assuming the 90 days horizon Vanguard Small Cap Value is expected to under-perform the Allianzgi Technology. But the mutual fund apears to be less risky and, when comparing its historical volatility, Vanguard Small Cap Value is 1.5 times less risky than Allianzgi Technology. The mutual fund trades about -0.3 of its potential returns per unit of risk. The Allianzgi Technology Fund is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  6,458  in Allianzgi Technology Fund on October 7, 2024 and sell it today you would lose (34.00) from holding Allianzgi Technology Fund or give up 0.53% of portfolio value over 90 days.

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

Vanguard Small Cap Value  vs.  Allianzgi Technology Fund

Vanguard Small Cap

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Small Cap Value are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. 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.

Allianzgi Technology

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Allianzgi Technology Fund are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Allianzgi Technology may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Vanguard Small-cap and Allianzgi Technology

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

The idea behind Vanguard Small Cap Value and Allianzgi Technology 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.