Correlation Between Vanguard Small-cap and Dell Technologies

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

By analyzing existing cross correlation between Vanguard Small Cap Index and Dell Technologies, you can compare the effects of market volatilities on Vanguard Small-cap and Dell Technologies 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 Dell Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small-cap and Dell Technologies.

Diversification Opportunities for Vanguard Small-cap and Dell Technologies

0.69

Correlation Coefficient

Vanguard Small-cap  Dell Technologies

Poor diversification

The 3 months correlation between Vanguard and Dell is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Index and Dell Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dell Technologies 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 Index are associated (or correlated) with Dell Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dell Technologies has no effect on the direction of Vanguard Small-cap i.e., Vanguard Small-cap and Dell Technologies go up and down completely randomly.

Pair Corralation between Vanguard Small-cap and Dell Technologies

Assuming the 90 days horizon Vanguard Small Cap Index is expected to generate 0.38 times more return on investment than Dell Technologies. However, Vanguard Small Cap Index is 2.63 times less risky than Dell Technologies. It trades about -0.11 of its potential returns per unit of risk. Dell Technologies is currently generating about -0.1 per unit of risk. If you would invest  11,503  in Vanguard Small Cap Index on December 29, 2024 and sell it today you would lose (880.00) from holding Vanguard Small Cap Index or give up 7.65% of portfolio value over 90 days.

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

Vanguard Small Cap Index  vs.  Dell Technologies

Vanguard Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Small Cap Index has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Dell Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dell Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Vanguard Small-cap and Dell Technologies

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

The idea behind Vanguard Small Cap Index and Dell Technologies 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.

Check out your portfolio center.

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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.