Correlation Between Vanguard Small-cap and Loomis Sayles

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

Diversification Opportunities for Vanguard Small-cap and Loomis Sayles

0.84

Correlation Coefficient

Vanguard Small-cap  Loomis Sayles

Very poor diversification

The 3 months correlation between Vanguard and Loomis is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Index and Loomis Sayles Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Loomis Sayles Small 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 Loomis Sayles. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Loomis Sayles Small has no effect on the direction of Vanguard Small-cap i.e., Vanguard Small-cap and Loomis Sayles go up and down completely randomly.

Pair Corralation between Vanguard Small-cap and Loomis Sayles

Assuming the 90 days horizon Vanguard Small Cap Index is expected to generate 0.79 times more return on investment than Loomis Sayles. However, Vanguard Small Cap Index is 1.26 times less risky than Loomis Sayles. It trades about 0.06 of its potential returns per unit of risk. Loomis Sayles Small is currently generating about 0.01 per unit of risk. If you would invest  29,633  in Vanguard Small Cap Index on October 7, 2024 and sell it today you would earn a total of  4,053  from holding Vanguard Small Cap Index or generate 13.68% return on investment over 90 days.

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

Vanguard Small Cap Index  vs.  Loomis Sayles Small

Vanguard Small Cap

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Small Cap Index are ranked lower than 4 (%) 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.

Loomis Sayles Small

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Loomis Sayles Small 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.

Pair Trading with Vanguard Small-cap and Loomis Sayles

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

The idea behind Vanguard Small Cap Index and Loomis Sayles Small 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.