Correlation Between Vanguard Small and Soybean Meal

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

By analyzing existing cross correlation between Vanguard Small Cap Index and Soybean Meal Futures, you can compare the effects of market volatilities on Vanguard Small and Soybean Meal 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 Soybean Meal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small and Soybean Meal.

Diversification Opportunities for Vanguard Small and Soybean Meal

-0.74

Correlation Coefficient

Vanguard Small  Soybean Meal

Pay attention - limited upside

The 3 months correlation between Vanguard and Soybean is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Index and Soybean Meal Futures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Soybean Meal Futures 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 Index are associated (or correlated) with Soybean Meal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Soybean Meal Futures has no effect on the direction of Vanguard Small i.e., Vanguard Small and Soybean Meal go up and down completely randomly.

Pair Corralation between Vanguard Small and Soybean Meal

Allowing for the 90-day total investment horizon Vanguard Small Cap Index is expected to generate 0.77 times more return on investment than Soybean Meal. However, Vanguard Small Cap Index is 1.3 times less risky than Soybean Meal. It trades about 0.2 of its potential returns per unit of risk. Soybean Meal Futures is currently generating about -0.12 per unit of risk. If you would invest  22,572  in Vanguard Small Cap Index on September 12, 2024 and sell it today you would earn a total of  2,895  from holding Vanguard Small Cap Index or generate 12.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Vanguard Small Cap Index  vs.  Soybean Meal Futures

Vanguard Small Cap

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Small Cap Index are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating fundamental drivers, Vanguard Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Soybean Meal Futures

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Soybean Meal Futures has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Commodity's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for Soybean Meal Futures shareholders.

Pair Trading with Vanguard Small and Soybean Meal

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

The idea behind Vanguard Small Cap Index and Soybean Meal Futures 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..