Correlation Between Vanguard Russell and Vanguard

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

By analyzing existing cross correlation between Vanguard Russell 2000 and Vanguard SP Mid Cap, you can compare the effects of market volatilities on Vanguard Russell and Vanguard 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 Russell with a short position of Vanguard. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Russell and Vanguard.

Diversification Opportunities for Vanguard Russell and Vanguard

0.96

Correlation Coefficient

Vanguard Russell  Vanguard

Almost no diversification

The 3 months correlation between Vanguard and Vanguard is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Russell 2000 and Vanguard SP Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard SP Mid and Vanguard Russell 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 Russell 2000 are associated (or correlated) with Vanguard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard SP Mid has no effect on the direction of Vanguard Russell i.e., Vanguard Russell and Vanguard go up and down completely randomly.

Pair Corralation between Vanguard Russell and Vanguard

Given the investment horizon of 90 days Vanguard Russell is expected to generate 1.11 times less return on investment than Vanguard. In addition to that, Vanguard Russell is 1.43 times more volatile than Vanguard SP Mid Cap. It trades about 0.13 of its total potential returns per unit of risk. Vanguard SP Mid Cap is currently generating about 0.21 per unit of volatility. If you would invest  10,875  in Vanguard SP Mid Cap on September 5, 2024 and sell it today you would earn a total of  1,381  from holding Vanguard SP Mid Cap or generate 12.7% return on investment over 90 days.

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

Vanguard Russell 2000  vs.  Vanguard SP Mid Cap

Vanguard Russell 2000

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Russell 2000 are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, Vanguard Russell may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Vanguard SP Mid

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard SP Mid Cap are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, Vanguard may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Vanguard Russell and Vanguard

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

The idea behind Vanguard Russell 2000 and Vanguard SP Mid 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.