Correlation Between Vanguard Diversified and Vanguard Explorer
Can any of the company-specific risk be diversified away by investing in both Vanguard Diversified 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 Vanguard Diversified and Vanguard Explorer into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Diversified Equity and Vanguard Explorer Value, you can compare the effects of market volatilities on Vanguard Diversified 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 Vanguard Diversified with a short position of Vanguard Explorer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Diversified and Vanguard Explorer.
Diversification Opportunities for Vanguard Diversified and Vanguard Explorer
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Vanguard and VANGUARD is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Diversified Equity and Vanguard Explorer Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Explorer Value and Vanguard Diversified 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 Diversified Equity 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 Value has no effect on the direction of Vanguard Diversified i.e., Vanguard Diversified and Vanguard Explorer go up and down completely randomly.
Pair Corralation between Vanguard Diversified and Vanguard Explorer
Assuming the 90 days horizon Vanguard Diversified is expected to generate 1.24 times less return on investment than Vanguard Explorer. But when comparing it to its historical volatility, Vanguard Diversified Equity is 1.38 times less risky than Vanguard Explorer. It trades about 0.09 of its potential returns per unit of risk. Vanguard Explorer Value is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 4,521 in Vanguard Explorer Value on August 24, 2024 and sell it today you would earn a total of 589.00 from holding Vanguard Explorer Value or generate 13.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Diversified Equity vs. Vanguard Explorer Value
Performance |
| Timeline |
| Vanguard Diversified |
| Vanguard Explorer Value |
Vanguard Diversified and Vanguard Explorer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Diversified and Vanguard Explorer
The main advantage of trading using opposite Vanguard Diversified and Vanguard Explorer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Diversified 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.| Vanguard Diversified vs. Vanguard Strategic Small Cap | Vanguard Diversified vs. Vanguard Mid Cap | Vanguard Diversified vs. Vanguard Explorer Value | Vanguard Diversified vs. Vanguard Large Cap Index |
| Vanguard Explorer vs. Vanguard Strategic Small Cap | Vanguard Explorer vs. Vanguard Emerging Markets | Vanguard Explorer vs. Vanguard Diversified Equity | Vanguard Explorer vs. Vanguard Mid Cap |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
Other Complementary Tools
| ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments | |
| Positions Ratings Determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| Technical Analysis Check basic technical indicators and analysis based on most latest market data | |
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital |