Correlation Between SM Investments and VANGUARD FUNDS

Can any of the company-specific risk be diversified away by investing in both SM Investments and VANGUARD FUNDS 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 SM Investments and VANGUARD FUNDS into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SM Investments and VANGUARD FUNDS PLC, you can compare the effects of market volatilities on SM Investments and VANGUARD FUNDS 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 SM Investments with a short position of VANGUARD FUNDS. Check out your portfolio center. Please also check ongoing floating volatility patterns of SM Investments and VANGUARD FUNDS.

Diversification Opportunities for SM Investments and VANGUARD FUNDS

-0.25

Correlation Coefficient

SM Investments  VANGUARD FUNDS

Very good diversification

The 3 months correlation between SVTMF and VANGUARD is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding SM Investments and VANGUARD FUNDS PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VANGUARD FUNDS PLC and SM Investments 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 SM Investments are associated (or correlated) with VANGUARD FUNDS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VANGUARD FUNDS PLC has no effect on the direction of SM Investments i.e., SM Investments and VANGUARD FUNDS go up and down completely randomly.

Pair Corralation between SM Investments and VANGUARD FUNDS

Assuming the 90 days horizon SM Investments is expected to generate 26.9 times less return on investment than VANGUARD FUNDS. But when comparing it to its historical volatility, SM Investments is 20.31 times less risky than VANGUARD FUNDS. It trades about 0.13 of its potential returns per unit of risk. VANGUARD FUNDS PLC is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  5,563  in VANGUARD FUNDS PLC on May 3, 2025 and sell it today you would earn a total of  369.00  from holding VANGUARD FUNDS PLC or generate 6.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.08%
Values	Daily Returns

SM Investments  vs.  VANGUARD FUNDS PLC

SM Investments

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SM Investments are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable primary indicators, SM Investments is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

VANGUARD FUNDS PLC

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in VANGUARD FUNDS PLC are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent fundamental indicators, VANGUARD FUNDS may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with SM Investments and VANGUARD FUNDS

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

The idea behind SM Investments and VANGUARD FUNDS PLC 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.

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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.