Correlation Between Vanguard Small and Energy Select
Can any of the company-specific risk be diversified away by investing in both Vanguard Small and Energy Select 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 Energy Select 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 Energy Select Sector, you can compare the effects of market volatilities on Vanguard Small and Energy Select 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 Energy Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small and Energy Select.
Diversification Opportunities for Vanguard Small and Energy Select
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vanguard and Energy is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Index and Energy Select Sector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy Select Sector 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 Energy Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy Select Sector has no effect on the direction of Vanguard Small i.e., Vanguard Small and Energy Select go up and down completely randomly.
Pair Corralation between Vanguard Small and Energy Select
Allowing for the 90-day total investment horizon Vanguard Small Cap Index is expected to generate 0.97 times more return on investment than Energy Select. However, Vanguard Small Cap Index is 1.03 times less risky than Energy Select. It trades about 0.06 of its potential returns per unit of risk. Energy Select Sector is currently generating about 0.03 per unit of risk. If you would invest 24,592 in Vanguard Small Cap Index on July 25, 2025 and sell it today you would earn a total of 817.00 from holding Vanguard Small Cap Index or generate 3.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Small Cap Index vs. Energy Select Sector
Performance |
| Timeline |
| Vanguard Small Cap |
| Energy Select Sector |
Vanguard Small and Energy Select Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Small and Energy Select
The main advantage of trading using opposite Vanguard Small and Energy Select positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Small position performs unexpectedly, Energy Select 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 Energy Select will offset losses from the drop in Energy Select's long position.| Vanguard Small vs. Vanguard Small Cap Index | Vanguard Small vs. Vanguard Mid Cap Index | Vanguard Small vs. Vanguard Mid Cap Index | Vanguard Small vs. Vanguard Mid Cap Index |
| Energy Select vs. Communication Services Select | Energy Select vs. iShares Select Dividend | Energy Select vs. iShares MSCI EAFE | Energy Select vs. Vanguard Ftse Social |
Check out your portfolio center.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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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