Correlation Between Vanguard Small-cap and Crm Long/short

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

Diversification Opportunities for Vanguard Small-cap and Crm Long/short

0.93

Correlation Coefficient

Vanguard Small-cap  Crm Long/short

Almost no diversification

The 3 months correlation between Vanguard and Crm is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Value and Crm Longshort Opport in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crm Longshort Opport 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 Value are associated (or correlated) with Crm Long/short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crm Longshort Opport has no effect on the direction of Vanguard Small-cap i.e., Vanguard Small-cap and Crm Long/short go up and down completely randomly.

Pair Corralation between Vanguard Small-cap and Crm Long/short

Assuming the 90 days horizon Vanguard Small Cap Value is expected to generate 1.82 times more return on investment than Crm Long/short. However, Vanguard Small-cap is 1.82 times more volatile than Crm Longshort Opport. It trades about 0.18 of its potential returns per unit of risk. Crm Longshort Opport is currently generating about 0.22 per unit of risk. If you would invest  4,621  in Vanguard Small Cap Value on September 4, 2024 and sell it today you would earn a total of  545.00  from holding Vanguard Small Cap Value or generate 11.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

Vanguard Small Cap Value  vs.  Crm Longshort Opport

Vanguard Small Cap

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Small Cap Value are ranked lower than 14 (%) 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 January 2025.

Crm Longshort Opport

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Crm Longshort Opport are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical indicators, Crm Long/short may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Vanguard Small-cap and Crm Long/short

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

The idea behind Vanguard Small Cap Value and Crm Longshort Opport 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.