Correlation Between Vanguard Small and Nicholas

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

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

Diversification Opportunities for Vanguard Small and Nicholas

0.97

Correlation Coefficient

Vanguard Small  Nicholas

Almost no diversification

The 3 months correlation between Vanguard and Nicholas is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Growth and Nicholas Ltd Edition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nicholas Edition 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 Growth are associated (or correlated) with Nicholas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nicholas Edition has no effect on the direction of Vanguard Small i.e., Vanguard Small and Nicholas go up and down completely randomly.

Pair Corralation between Vanguard Small and Nicholas

Assuming the 90 days horizon Vanguard Small Cap Growth is expected to generate 1.19 times more return on investment than Nicholas. However, Vanguard Small is 1.19 times more volatile than Nicholas Ltd Edition. It trades about 0.24 of its potential returns per unit of risk. Nicholas Ltd Edition is currently generating about 0.15 per unit of risk. If you would invest  7,946  in Vanguard Small Cap Growth on September 17, 2024 and sell it today you would earn a total of  357.00  from holding Vanguard Small Cap Growth or generate 4.49% 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 Growth  vs.  Nicholas Ltd Edition

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 Growth are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Vanguard Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Nicholas Edition

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nicholas Ltd Edition are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Nicholas 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 Small and Nicholas

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

The idea behind Vanguard Small Cap Growth and Nicholas Ltd Edition 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.