Correlation Between Smallcap World and Vanguard Total

Can any of the company-specific risk be diversified away by investing in both Smallcap World and Vanguard Total 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 Smallcap World and Vanguard Total into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Smallcap World Fund and Vanguard Total International, you can compare the effects of market volatilities on Smallcap World and Vanguard Total 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 Smallcap World with a short position of Vanguard Total. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smallcap World and Vanguard Total.

Diversification Opportunities for Smallcap World and Vanguard Total

0.69

Correlation Coefficient

Smallcap World  Vanguard Total

Poor diversification

The 3 months correlation between Smallcap and Vanguard is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Smallcap World Fund and Vanguard Total International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Total Inter and Smallcap World 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 Smallcap World Fund are associated (or correlated) with Vanguard Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Total Inter has no effect on the direction of Smallcap World i.e., Smallcap World and Vanguard Total go up and down completely randomly.

Pair Corralation between Smallcap World and Vanguard Total

Assuming the 90 days horizon Smallcap World Fund is expected to generate 4.07 times more return on investment than Vanguard Total. However, Smallcap World is 4.07 times more volatile than Vanguard Total International. It trades about 0.17 of its potential returns per unit of risk. Vanguard Total International is currently generating about 0.14 per unit of risk. If you would invest  6,859  in Smallcap World Fund on May 10, 2025 and sell it today you would earn a total of  523.00  from holding Smallcap World Fund or generate 7.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Smallcap World Fund  vs.  Vanguard Total International

Smallcap World

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Smallcap World Fund are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Smallcap World may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Vanguard Total Inter

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Total International are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental drivers, Vanguard Total is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Smallcap World and Vanguard Total

The main advantage of trading using opposite Smallcap World and Vanguard Total positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smallcap World position performs unexpectedly, Vanguard Total 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 Total will offset losses from the drop in Vanguard Total's long position.

The idea behind Smallcap World Fund and Vanguard Total International pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.