Correlation Between Vanguard Small and Fuller Thaler

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

By analyzing existing cross correlation between Vanguard Small Cap Value and Fuller Thaler Behavioral, you can compare the effects of market volatilities on Vanguard Small and Fuller Thaler 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 Fuller Thaler. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small and Fuller Thaler.

Diversification Opportunities for Vanguard Small and Fuller Thaler

0.93

Correlation Coefficient

Vanguard Small  Fuller Thaler

Almost no diversification

The 3 months correlation between Vanguard and Fuller is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Value and Fuller Thaler Behavioral in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fuller Thaler Behavioral 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 Value are associated (or correlated) with Fuller Thaler. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fuller Thaler Behavioral has no effect on the direction of Vanguard Small i.e., Vanguard Small and Fuller Thaler go up and down completely randomly.

Pair Corralation between Vanguard Small and Fuller Thaler

Assuming the 90 days horizon Vanguard Small is expected to generate 2.31 times less return on investment than Fuller Thaler. But when comparing it to its historical volatility, Vanguard Small Cap Value is 1.61 times less risky than Fuller Thaler. It trades about 0.11 of its potential returns per unit of risk. Fuller Thaler Behavioral is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  2,117  in Fuller Thaler Behavioral on May 4, 2025 and sell it today you would earn a total of  368.00  from holding Fuller Thaler Behavioral or generate 17.38% 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 Value  vs.  Fuller Thaler Behavioral

Vanguard Small Cap

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Small Cap Value are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Vanguard Small may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Fuller Thaler Behavioral

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fuller Thaler Behavioral are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Fuller Thaler showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vanguard Small and Fuller Thaler

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

The idea behind Vanguard Small Cap Value and Fuller Thaler Behavioral 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.