Correlation Between Vanguard Value and Us Small

Can any of the company-specific risk be diversified away by investing in both Vanguard Value and Us 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 Us 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 Us Small Cap, you can compare the effects of market volatilities on Vanguard Value and Us 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 Us Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Value and Us Small.

Diversification Opportunities for Vanguard Value and Us Small

0.78

Correlation Coefficient

Vanguard Value  Us Small

Poor diversification

The 3 months correlation between Vanguard and DFSVX is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Value Index and Us Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Us 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 Us Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Us Small Cap has no effect on the direction of Vanguard Value i.e., Vanguard Value and Us Small go up and down completely randomly.

Pair Corralation between Vanguard Value and Us Small

Assuming the 90 days horizon Vanguard Value Index is expected to under-perform the Us Small. But the mutual fund apears to be less risky and, when comparing its historical volatility, Vanguard Value Index is 2.02 times less risky than Us Small. The mutual fund trades about -0.13 of its potential returns per unit of risk. The Us Small Cap is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  4,828  in Us Small Cap on September 22, 2024 and sell it today you would lose (9.00) from holding Us Small Cap or give up 0.19% of portfolio value over 90 days.

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

Vanguard Value Index  vs.  Us Small Cap

Vanguard Value Index

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Value Index has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Vanguard Value is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Us Small Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Us Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Us Small 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 Value and Us Small

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

The idea behind Vanguard Value Index and Us Small 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.