Correlation Between Vanguard Small-cap and Federated Government
Can any of the company-specific risk be diversified away by investing in both Vanguard Small-cap and Federated Government 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 Federated Government 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 Federated Government Income, you can compare the effects of market volatilities on Vanguard Small-cap and Federated Government 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 Federated Government. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small-cap and Federated Government.
Diversification Opportunities for Vanguard Small-cap and Federated Government
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vanguard and Federated is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Index and Federated Government Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated 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 Index are associated (or correlated) with Federated Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Government has no effect on the direction of Vanguard Small-cap i.e., Vanguard Small-cap and Federated Government go up and down completely randomly.
Pair Corralation between Vanguard Small-cap and Federated Government
Assuming the 90 days horizon Vanguard Small Cap Index is expected to generate 3.07 times more return on investment than Federated Government. However, Vanguard Small-cap is 3.07 times more volatile than Federated Government Income. It trades about 0.16 of its potential returns per unit of risk. Federated Government Income is currently generating about 0.22 per unit of risk. If you would invest 11,164 in Vanguard Small Cap Index on June 9, 2025 and sell it today you would earn a total of 1,083 from holding Vanguard Small Cap Index or generate 9.7% 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. Federated Government Income
Performance |
| Timeline |
| Vanguard Small Cap |
| Federated Government |
Vanguard Small-cap and Federated Government Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Small-cap and Federated Government
The main advantage of trading using opposite Vanguard Small-cap and Federated Government positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Small-cap position performs unexpectedly, Federated Government 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 Federated Government will offset losses from the drop in Federated Government's long position.| Vanguard Small-cap vs. Vanguard Mid Cap Index | Vanguard Small-cap vs. Vanguard 500 Index | Vanguard Small-cap vs. Vanguard Emerging Markets | Vanguard Small-cap vs. Vanguard Reit Index |
| Federated Government vs. Dodge Cox Emerging | Federated Government vs. Siit Emerging Markets | Federated Government vs. The Hartford Emerging | Federated Government vs. Morgan Stanley Emerging |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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