Correlation Between Vanguard Russell and Vanguard Mid

Can any of the company-specific risk be diversified away by investing in both Vanguard Russell and Vanguard Mid 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 Russell and Vanguard Mid into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Vanguard Russell 2000 and Vanguard Mid Cap Growth, you can compare the effects of market volatilities on Vanguard Russell and Vanguard Mid 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 Russell with a short position of Vanguard Mid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Russell and Vanguard Mid.

Diversification Opportunities for Vanguard Russell and Vanguard Mid

0.97

Correlation Coefficient

Vanguard Russell  Vanguard Mid

Almost no diversification

The 3 months correlation between Vanguard and Vanguard is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Russell 2000 and Vanguard Mid Cap Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Mid Cap and Vanguard Russell 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 Russell 2000 are associated (or correlated) with Vanguard Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Mid Cap has no effect on the direction of Vanguard Russell i.e., Vanguard Russell and Vanguard Mid go up and down completely randomly.

Pair Corralation between Vanguard Russell and Vanguard Mid

Assuming the 90 days horizon Vanguard Russell is expected to generate 1.35 times less return on investment than Vanguard Mid. In addition to that, Vanguard Russell is 1.49 times more volatile than Vanguard Mid Cap Growth. It trades about 0.12 of its total potential returns per unit of risk. Vanguard Mid Cap Growth is currently generating about 0.25 per unit of volatility. If you would invest  23,615  in Vanguard Mid Cap Growth on September 18, 2024 and sell it today you would earn a total of  3,227  from holding Vanguard Mid Cap Growth or generate 13.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

Vanguard Russell 2000  vs.  Vanguard Mid Cap Growth

Vanguard Russell 2000

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Russell 2000 are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain technical and fundamental indicators, Vanguard Russell may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Vanguard Mid Cap

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Mid Cap Growth are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Vanguard Mid unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vanguard Russell and Vanguard Mid

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

The idea behind Vanguard Russell 2000 and Vanguard Mid Cap Growth 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.