Correlation Between Vanguard Small-cap and Vanguard Multi

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

Diversification Opportunities for Vanguard Small-cap and Vanguard Multi

0.31

Correlation Coefficient

Vanguard Small-cap  Vanguard Multi

Weak diversification

The 3 months correlation between Vanguard and Vanguard is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Index and Vanguard Multi Sector Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Multi Sector and Vanguard Small-cap 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 Vanguard Multi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Multi Sector has no effect on the direction of Vanguard Small-cap i.e., Vanguard Small-cap and Vanguard Multi go up and down completely randomly.

Pair Corralation between Vanguard Small-cap and Vanguard Multi

Assuming the 90 days horizon Vanguard Small Cap Index is expected to generate 9.16 times more return on investment than Vanguard Multi. However, Vanguard Small-cap is 9.16 times more volatile than Vanguard Multi Sector Income. It trades about 0.04 of its potential returns per unit of risk. Vanguard Multi Sector Income is currently generating about 0.16 per unit of risk. If you would invest  34,973  in Vanguard Small Cap Index on September 10, 2025 and sell it today you would earn a total of  883.00  from holding Vanguard Small Cap Index or generate 2.52% return on investment over 90 days.

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

Vanguard Small Cap Index  vs.  Vanguard Multi Sector Income

Vanguard Small Cap

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Small Cap Index are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Vanguard Small-cap is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Vanguard Multi Sector

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Multi Sector Income are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Vanguard Multi is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vanguard Small-cap and Vanguard Multi

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

The idea behind Vanguard Small Cap Index and Vanguard Multi Sector Income 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.