Correlation Between Vanguard Small-cap and Vanguard Emerging
Can any of the company-specific risk be diversified away by investing in both Vanguard Small-cap and Vanguard Emerging 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 Vanguard Emerging 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 Vanguard Emerging Markets, you can compare the effects of market volatilities on Vanguard Small-cap and Vanguard Emerging 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 Vanguard Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small-cap and Vanguard Emerging.
Diversification Opportunities for Vanguard Small-cap and Vanguard Emerging
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vanguard and Vanguard is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Index and Vanguard Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Emerging Markets 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 Index are associated (or correlated) with Vanguard Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Emerging Markets has no effect on the direction of Vanguard Small-cap i.e., Vanguard Small-cap and Vanguard Emerging go up and down completely randomly.
Pair Corralation between Vanguard Small-cap and Vanguard Emerging
Assuming the 90 days horizon Vanguard Small-cap is expected to generate 2.63 times less return on investment than Vanguard Emerging. In addition to that, Vanguard Small-cap is 2.24 times more volatile than Vanguard Emerging Markets. It trades about 0.03 of its total potential returns per unit of risk. Vanguard Emerging Markets is currently generating about 0.19 per unit of volatility. If you would invest 2,334 in Vanguard Emerging Markets on March 11, 2025 and sell it today you would earn a total of 40.00 from holding Vanguard Emerging Markets or generate 1.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Small Cap Index vs. Vanguard Emerging Markets
Performance |
| Timeline |
| Vanguard Small Cap |
| Vanguard Emerging Markets |
Vanguard Small-cap and Vanguard Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Small-cap and Vanguard Emerging
The main advantage of trading using opposite Vanguard Small-cap and Vanguard Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Small-cap position performs unexpectedly, Vanguard Emerging 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 Vanguard Emerging will offset losses from the drop in Vanguard Emerging's long position.| Vanguard Small-cap vs. Vanguard Mid Cap Index | Vanguard Small-cap vs. Vanguard Total Bond | Vanguard Small-cap vs. Vanguard Institutional Index | Vanguard Small-cap vs. Vanguard Total International |
| Vanguard Emerging vs. Cref Inflation Linked Bond | Vanguard Emerging vs. Tiaa Cref Inflation Link | Vanguard Emerging vs. Ab Bond Inflation | Vanguard Emerging vs. Ab Bond Inflation |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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