Correlation Between Vanguard Small-cap and Amg Timessquare

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

Diversification Opportunities for Vanguard Small-cap and Amg Timessquare

0.77

Correlation Coefficient

Vanguard Small-cap  Amg Timessquare

Poor diversification

The 3 months correlation between Vanguard and Amg is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Growth and Amg Timessquare Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amg Timessquare 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 Growth are associated (or correlated) with Amg Timessquare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amg Timessquare Small has no effect on the direction of Vanguard Small-cap i.e., Vanguard Small-cap and Amg Timessquare go up and down completely randomly.

Pair Corralation between Vanguard Small-cap and Amg Timessquare

Assuming the 90 days horizon Vanguard Small Cap Growth is expected to generate 0.97 times more return on investment than Amg Timessquare. However, Vanguard Small Cap Growth is 1.03 times less risky than Amg Timessquare. It trades about 0.08 of its potential returns per unit of risk. Amg Timessquare Small is currently generating about 0.05 per unit of risk. If you would invest  8,220  in Vanguard Small Cap Growth on October 7, 2024 and sell it today you would earn a total of  1,845  from holding Vanguard Small Cap Growth or generate 22.45% return on investment over 90 days.

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

Vanguard Small Cap Growth  vs.  Amg Timessquare Small

Vanguard Small Cap

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Small Cap Growth are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Vanguard Small-cap may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Amg Timessquare Small

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Amg Timessquare Small has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Amg Timessquare is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vanguard Small-cap and Amg Timessquare

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

The idea behind Vanguard Small Cap Growth and Amg Timessquare 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.