Correlation Between Vanguard Small and Conestoga Small

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

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

Diversification Opportunities for Vanguard Small and Conestoga Small

0.98

Correlation Coefficient

Vanguard Small  Conestoga Small

Almost no diversification

The 3 months correlation between Vanguard and CONESTOGA is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Growth and Conestoga Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Conestoga Small Cap and Vanguard Small 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 Growth are associated (or correlated) with Conestoga Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Conestoga Small Cap has no effect on the direction of Vanguard Small i.e., Vanguard Small and Conestoga Small go up and down completely randomly.

Pair Corralation between Vanguard Small and Conestoga Small

Assuming the 90 days horizon Vanguard Small Cap Growth is expected to generate 0.84 times more return on investment than Conestoga Small. However, Vanguard Small Cap Growth is 1.19 times less risky than Conestoga Small. It trades about 0.28 of its potential returns per unit of risk. Conestoga Small Cap is currently generating about 0.19 per unit of risk. If you would invest  8,887  in Vanguard Small Cap Growth on September 4, 2024 and sell it today you would earn a total of  1,690  from holding Vanguard Small Cap Growth or generate 19.02% return on investment over 90 days.

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

Vanguard Small Cap Growth  vs.  Conestoga Small Cap

Vanguard Small Cap

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Small Cap Growth are ranked lower than 21 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Vanguard Small showed solid returns over the last few months and may actually be approaching a breakup point.

Conestoga Small Cap

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Conestoga Small Cap are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Conestoga Small showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vanguard Small and Conestoga Small

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

The idea behind Vanguard Small Cap Growth and Conestoga Small Cap 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.