Correlation Between Vanguard Extended and Mid Capitalization
Can any of the company-specific risk be diversified away by investing in both Vanguard Extended and Mid Capitalization 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 Extended and Mid Capitalization into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Extended Market and Mid Capitalization Portfolio, you can compare the effects of market volatilities on Vanguard Extended and Mid Capitalization 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 Extended with a short position of Mid Capitalization. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Extended and Mid Capitalization.
Diversification Opportunities for Vanguard Extended and Mid Capitalization
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Vanguard and Mid is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Extended Market and Mid Capitalization Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mid Capitalization and Vanguard Extended 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 Extended Market are associated (or correlated) with Mid Capitalization. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mid Capitalization has no effect on the direction of Vanguard Extended i.e., Vanguard Extended and Mid Capitalization go up and down completely randomly.
Pair Corralation between Vanguard Extended and Mid Capitalization
Assuming the 90 days horizon Vanguard Extended Market is expected to generate 1.08 times more return on investment than Mid Capitalization. However, Vanguard Extended is 1.08 times more volatile than Mid Capitalization Portfolio. It trades about 0.25 of its potential returns per unit of risk. Mid Capitalization Portfolio is currently generating about 0.26 per unit of risk. If you would invest 12,933 in Vanguard Extended Market on April 26, 2025 and sell it today you would earn a total of 2,183 from holding Vanguard Extended Market or generate 16.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Extended Market vs. Mid Capitalization Portfolio
Performance |
| Timeline |
| Vanguard Extended Market |
| Mid Capitalization |
Vanguard Extended and Mid Capitalization Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Extended and Mid Capitalization
The main advantage of trading using opposite Vanguard Extended and Mid Capitalization positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Extended position performs unexpectedly, Mid Capitalization 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 Mid Capitalization will offset losses from the drop in Mid Capitalization's long position.| Vanguard Extended vs. Payden High Income | Vanguard Extended vs. Neuberger Berman Income | Vanguard Extended vs. Buffalo High Yield | Vanguard Extended vs. Blackrock High Yield |
| Mid Capitalization vs. Abs Insights Emerging | Mid Capitalization vs. Ab Select Equity | Mid Capitalization vs. Wabmsx | Mid Capitalization vs. Flkypx |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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