Correlation Between Vanguard Tax-managed and Geneva Smid

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

By analyzing existing cross correlation between Vanguard Tax Managed Capital and Geneva Smid Cap, you can compare the effects of market volatilities on Vanguard Tax-managed and Geneva Smid 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 Tax-managed with a short position of Geneva Smid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Tax-managed and Geneva Smid.

Diversification Opportunities for Vanguard Tax-managed and Geneva Smid

0.91

Correlation Coefficient

Vanguard Tax-managed  Geneva Smid

Almost no diversification

The 3 months correlation between Vanguard and Geneva is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Tax Managed Capital and Geneva Smid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Geneva Smid Cap and Vanguard Tax-managed 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 Tax Managed Capital are associated (or correlated) with Geneva Smid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Geneva Smid Cap has no effect on the direction of Vanguard Tax-managed i.e., Vanguard Tax-managed and Geneva Smid go up and down completely randomly.

Pair Corralation between Vanguard Tax-managed and Geneva Smid

Assuming the 90 days horizon Vanguard Tax Managed Capital is expected to under-perform the Geneva Smid. But the mutual fund apears to be less risky and, when comparing its historical volatility, Vanguard Tax Managed Capital is 1.08 times less risky than Geneva Smid. The mutual fund trades about -0.09 of its potential returns per unit of risk. The Geneva Smid Cap is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  1,042  in Geneva Smid Cap on December 29, 2024 and sell it today you would lose (48.00) from holding Geneva Smid Cap or give up 4.61% of portfolio value over 90 days.

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

Vanguard Tax Managed Capital  vs.  Geneva Smid Cap

Vanguard Tax Managed

Risk-Adjusted Performance

Very Weak

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

Geneva Smid Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Geneva Smid Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Geneva Smid 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 Tax-managed and Geneva Smid

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

The idea behind Vanguard Tax Managed Capital and Geneva Smid 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.