Correlation Between Vanguard Value and Avantis Small
Can any of the company-specific risk be diversified away by investing in both Vanguard Value and Avantis 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 Value and Avantis Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Value Index and Avantis Small Cap, you can compare the effects of market volatilities on Vanguard Value and Avantis 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 Value with a short position of Avantis Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Value and Avantis Small.
Diversification Opportunities for Vanguard Value and Avantis Small
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vanguard and Avantis is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Value Index and Avantis Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avantis Small Cap and Vanguard Value 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 Value Index are associated (or correlated) with Avantis Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avantis Small Cap has no effect on the direction of Vanguard Value i.e., Vanguard Value and Avantis Small go up and down completely randomly.
Pair Corralation between Vanguard Value and Avantis Small
Considering the 90-day investment horizon Vanguard Value Index is expected to under-perform the Avantis Small. But the etf apears to be less risky and, when comparing its historical volatility, Vanguard Value Index is 1.98 times less risky than Avantis Small. The etf trades about -0.04 of its potential returns per unit of risk. The Avantis Small Cap is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 9,661 in Avantis Small Cap on October 6, 2024 and sell it today you would earn a total of 63.00 from holding Avantis Small Cap or generate 0.65% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Vanguard Value Index vs. Avantis Small Cap
Performance |
Timeline |
Vanguard Value Index |
Avantis Small Cap |
Vanguard Value and Avantis Small Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Vanguard Value and Avantis Small
The main advantage of trading using opposite Vanguard Value and Avantis Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Value position performs unexpectedly, Avantis 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 Avantis Small will offset losses from the drop in Avantis Small's long position.Vanguard Value vs. Vanguard Growth Index | Vanguard Value vs. Vanguard Small Cap Value | Vanguard Value vs. Vanguard Mid Cap Value | Vanguard Value vs. Vanguard Small Cap Index |
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Check out your portfolio center.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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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