Correlation Between Vanguard Small and Defiance Daily

Can any of the company-specific risk be diversified away by investing in both Vanguard Small and Defiance Daily 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 Defiance Daily 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 Defiance Daily Target, you can compare the effects of market volatilities on Vanguard Small and Defiance Daily 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 Defiance Daily. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small and Defiance Daily.

Diversification Opportunities for Vanguard Small and Defiance Daily

0.05

Correlation Coefficient

Vanguard Small  Defiance Daily

Significant diversification

The 3 months correlation between Vanguard and Defiance is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Index and Defiance Daily Target in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Defiance Daily Target 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 Defiance Daily. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Defiance Daily Target has no effect on the direction of Vanguard Small i.e., Vanguard Small and Defiance Daily go up and down completely randomly.

Pair Corralation between Vanguard Small and Defiance Daily

Allowing for the 90-day total investment horizon Vanguard Small is expected to generate 7.97 times less return on investment than Defiance Daily. But when comparing it to its historical volatility, Vanguard Small Cap Index is 9.64 times less risky than Defiance Daily. It trades about 0.23 of its potential returns per unit of risk. Defiance Daily Target is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  2,148  in Defiance Daily Target on April 23, 2025 and sell it today you would earn a total of  704.00  from holding Defiance Daily Target or generate 32.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	32.79%
Values	Daily Returns

Vanguard Small Cap Index  vs.  Defiance Daily Target

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 17 (%) 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.

Defiance Daily Target

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Defiance Daily Target are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Defiance Daily showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vanguard Small and Defiance Daily

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

The idea behind Vanguard Small Cap Index and Defiance Daily Target 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.