Correlation Between Vanguard Small and Great West

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

By analyzing existing cross correlation between Vanguard Small Cap Value and Great West Loomis Sayles, you can compare the effects of market volatilities on Vanguard Small and Great West 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 Great West. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small and Great West.

Diversification Opportunities for Vanguard Small and Great West

0.94

Correlation Coefficient

Vanguard Small  Great West

Almost no diversification

The 3 months correlation between Vanguard and Great is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Value and Great West Loomis Sayles in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great West Loomis 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 Value are associated (or correlated) with Great West. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Great West Loomis has no effect on the direction of Vanguard Small i.e., Vanguard Small and Great West go up and down completely randomly.

Pair Corralation between Vanguard Small and Great West

Assuming the 90 days horizon Vanguard Small Cap Value is expected to under-perform the Great West. But the mutual fund apears to be less risky and, when comparing its historical volatility, Vanguard Small Cap Value is 1.25 times less risky than Great West. The mutual fund trades about -0.02 of its potential returns per unit of risk. The Great West Loomis Sayles is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  4,112  in Great West Loomis Sayles on September 13, 2024 and sell it today you would earn a total of  6.00  from holding Great West Loomis Sayles or generate 0.15% return on investment over 90 days.

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

Vanguard Small Cap Value  vs.  Great West Loomis Sayles

Vanguard Small Cap

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Small Cap Value are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly abnormal forward indicators, Vanguard Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Great West Loomis

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Great West Loomis Sayles are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Great West may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Vanguard Small and Great West

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

The idea behind Vanguard Small Cap Value and Great West Loomis Sayles 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.