Correlation Between Vanguard Small-cap and Pace Small/medium
Can any of the company-specific risk be diversified away by investing in both Vanguard Small-cap and Pace Small/medium 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-cap and Pace Small/medium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Small Cap Value and Pace Smallmedium Value, you can compare the effects of market volatilities on Vanguard Small-cap and Pace Small/medium 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-cap with a short position of Pace Small/medium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small-cap and Pace Small/medium.
Diversification Opportunities for Vanguard Small-cap and Pace Small/medium
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Vanguard and Pace is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Value and Pace Smallmedium Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pace Smallmedium Value and Vanguard Small-cap 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 Value are associated (or correlated) with Pace Small/medium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pace Smallmedium Value has no effect on the direction of Vanguard Small-cap i.e., Vanguard Small-cap and Pace Small/medium go up and down completely randomly.
Pair Corralation between Vanguard Small-cap and Pace Small/medium
Assuming the 90 days horizon Vanguard Small Cap Value is expected to under-perform the Pace Small/medium. But the mutual fund apears to be less risky and, when comparing its historical volatility, Vanguard Small Cap Value is 1.17 times less risky than Pace Small/medium. The mutual fund trades about -0.03 of its potential returns per unit of risk. The Pace Smallmedium Value is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 1,617 in Pace Smallmedium Value on March 25, 2025 and sell it today you would lose (5.00) from holding Pace Smallmedium Value or give up 0.31% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Small Cap Value vs. Pace Smallmedium Value
Performance |
| Timeline |
| Vanguard Small Cap |
| Pace Smallmedium Value |
Vanguard Small-cap and Pace Small/medium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Small-cap and Pace Small/medium
The main advantage of trading using opposite Vanguard Small-cap and Pace Small/medium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Small-cap position performs unexpectedly, Pace Small/medium 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 Pace Small/medium will offset losses from the drop in Pace Small/medium's long position.| Vanguard Small-cap vs. Hennessy Nerstone Mid | Vanguard Small-cap vs. Queens Road Small | Vanguard Small-cap vs. Lord Abbett Small | Vanguard Small-cap vs. Pace Smallmedium Value |
| Pace Small/medium vs. American Funds Government | Pace Small/medium vs. Short Term Government Fund | Pace Small/medium vs. Dreyfus Government Cash | Pace Small/medium vs. Payden Government Fund |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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