Correlation Between Vanguard Primecap and Vanguard Small

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

By analyzing existing cross correlation between Vanguard Primecap E and Vanguard Small Cap Growth, you can compare the effects of market volatilities on Vanguard Primecap and Vanguard Small 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 Primecap with a short position of Vanguard Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Primecap and Vanguard Small.

Diversification Opportunities for Vanguard Primecap and Vanguard Small

0.97

Correlation Coefficient

Vanguard Primecap  Vanguard Small

Almost no diversification

The 3 months correlation between Vanguard and Vanguard is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Primecap E and Vanguard Small Cap Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Small Cap and Vanguard Primecap 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 Primecap E are associated (or correlated) with Vanguard Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Small Cap has no effect on the direction of Vanguard Primecap i.e., Vanguard Primecap and Vanguard Small go up and down completely randomly.

Pair Corralation between Vanguard Primecap and Vanguard Small

Assuming the 90 days horizon Vanguard Primecap E is expected to generate 0.87 times more return on investment than Vanguard Small. However, Vanguard Primecap E is 1.15 times less risky than Vanguard Small. It trades about 0.2 of its potential returns per unit of risk. Vanguard Small Cap Growth is currently generating about 0.16 per unit of risk. If you would invest  3,232  in Vanguard Primecap E on May 6, 2025 and sell it today you would earn a total of  373.00  from holding Vanguard Primecap E or generate 11.54% return on investment over 90 days.

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

Vanguard Primecap E  vs.  Vanguard Small Cap Growth

Vanguard Primecap

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Primecap E are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Vanguard Primecap may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Vanguard Small Cap

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Small Cap Growth are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Vanguard Small may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Vanguard Primecap and Vanguard Small

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

The idea behind Vanguard Primecap E and Vanguard Small Cap Growth 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.