Correlation Between Vanguard Small and RiverFront Dynamic

Can any of the company-specific risk be diversified away by investing in both Vanguard Small and RiverFront Dynamic 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 and RiverFront Dynamic 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 RiverFront Dynamic Dividend, you can compare the effects of market volatilities on Vanguard Small and RiverFront Dynamic 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 with a short position of RiverFront Dynamic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small and RiverFront Dynamic.

Diversification Opportunities for Vanguard Small and RiverFront Dynamic

0.98

Correlation Coefficient

Vanguard Small  RiverFront Dynamic

Almost no diversification

The 3 months correlation between Vanguard and RiverFront is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Index and RiverFront Dynamic Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RiverFront Dynamic and Vanguard Small 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 RiverFront Dynamic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RiverFront Dynamic has no effect on the direction of Vanguard Small i.e., Vanguard Small and RiverFront Dynamic go up and down completely randomly.

Pair Corralation between Vanguard Small and RiverFront Dynamic

Allowing for the 90-day total investment horizon Vanguard Small is expected to generate 1.09 times less return on investment than RiverFront Dynamic. In addition to that, Vanguard Small is 1.36 times more volatile than RiverFront Dynamic Dividend. It trades about 0.23 of its total potential returns per unit of risk. RiverFront Dynamic Dividend is currently generating about 0.34 per unit of volatility. If you would invest  5,113  in RiverFront Dynamic Dividend on April 24, 2025 and sell it today you would earn a total of  865.00  from holding RiverFront Dynamic Dividend or generate 16.92% 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.  RiverFront Dynamic Dividend

Vanguard Small Cap

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Small Cap Index are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating fundamental drivers, Vanguard Small sustained solid returns over the last few months and may actually be approaching a breakup point.

RiverFront Dynamic

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in RiverFront Dynamic Dividend are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent fundamental indicators, RiverFront Dynamic sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vanguard Small and RiverFront Dynamic

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

The idea behind Vanguard Small Cap Index and RiverFront Dynamic Dividend 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 CEOs Directory module to screen CEOs from public companies around the world.