Correlation Between Vanguard Small-cap and Long-term
Can any of the company-specific risk be diversified away by investing in both Vanguard Small-cap and Long-term 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 Long-term 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 Long Term Government Fund, you can compare the effects of market volatilities on Vanguard Small-cap and Long-term 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 Long-term. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small-cap and Long-term.
Diversification Opportunities for Vanguard Small-cap and Long-term
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Vanguard and Long-term is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Value and Long Term Government Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Long Term Government 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 Long-term. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Long Term Government has no effect on the direction of Vanguard Small-cap i.e., Vanguard Small-cap and Long-term go up and down completely randomly.
Pair Corralation between Vanguard Small-cap and Long-term
Assuming the 90 days horizon Vanguard Small Cap Value is expected to generate 1.41 times more return on investment than Long-term. However, Vanguard Small-cap is 1.41 times more volatile than Long Term Government Fund. It trades about 0.05 of its potential returns per unit of risk. Long Term Government Fund is currently generating about 0.01 per unit of risk. If you would invest 3,781 in Vanguard Small Cap Value on June 2, 2025 and sell it today you would earn a total of 1,224 from holding Vanguard Small Cap Value or generate 32.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Small Cap Value vs. Long Term Government Fund
Performance |
| Timeline |
| Vanguard Small Cap |
| Long Term Government |
Vanguard Small-cap and Long-term Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Small-cap and Long-term
The main advantage of trading using opposite Vanguard Small-cap and Long-term positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Small-cap position performs unexpectedly, Long-term 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 Long-term will offset losses from the drop in Long-term's long position.| Vanguard Small-cap vs. Strategic Advisers Income | Vanguard Small-cap vs. American Century High | Vanguard Small-cap vs. City National Rochdale | Vanguard Small-cap vs. Dunham High Yield |
| Long-term vs. Sit Government Securities | Long-term vs. Wesmark Government Bond | Long-term vs. Us Government Securities | Long-term vs. Aig Government Money |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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