Correlation Between Third Avenue and Vanguard Explorer
Can any of the company-specific risk be diversified away by investing in both Third Avenue and Vanguard Explorer 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 Third Avenue and Vanguard Explorer into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Third Avenue Real and Vanguard Explorer Fund, you can compare the effects of market volatilities on Third Avenue and Vanguard Explorer 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 Third Avenue with a short position of Vanguard Explorer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Third Avenue and Vanguard Explorer.
Diversification Opportunities for Third Avenue and Vanguard Explorer
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Third and Vanguard is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Third Avenue Real and Vanguard Explorer Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Explorer and Third Avenue 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 Third Avenue Real are associated (or correlated) with Vanguard Explorer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Explorer has no effect on the direction of Third Avenue i.e., Third Avenue and Vanguard Explorer go up and down completely randomly.
Pair Corralation between Third Avenue and Vanguard Explorer
Assuming the 90 days horizon Third Avenue Real is expected to generate 1.0 times more return on investment than Vanguard Explorer. However, Third Avenue is 1.0 times more volatile than Vanguard Explorer Fund. It trades about 0.08 of its potential returns per unit of risk. Vanguard Explorer Fund is currently generating about 0.06 per unit of risk. If you would invest 1,980 in Third Avenue Real on September 12, 2024 and sell it today you would earn a total of 601.00 from holding Third Avenue Real or generate 30.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Third Avenue Real vs. Vanguard Explorer Fund
Performance |
| Timeline |
| Third Avenue Real |
| Vanguard Explorer |
Third Avenue and Vanguard Explorer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Third Avenue and Vanguard Explorer
The main advantage of trading using opposite Third Avenue and Vanguard Explorer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Third Avenue position performs unexpectedly, Vanguard Explorer 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 Explorer will offset losses from the drop in Vanguard Explorer's long position.| Third Avenue vs. HUMANA INC | Third Avenue vs. Barloworld Ltd ADR | Third Avenue vs. Morningstar Unconstrained Allocation | Third Avenue vs. Thrivent High Yield |
| Vanguard Explorer vs. Third Avenue Real | Vanguard Explorer vs. Aegis Value Fund | Vanguard Explorer vs. Litman Gregory Masters | Vanguard Explorer vs. Marsico Growth Fund |
Check out your portfolio center.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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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