Correlation Between Vanguard Explorer and Small Midcap
Can any of the company-specific risk be diversified away by investing in both Vanguard Explorer and Small Midcap 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 Explorer and Small Midcap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Explorer Value and Small Midcap Dividend Income, you can compare the effects of market volatilities on Vanguard Explorer and Small Midcap 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 Explorer with a short position of Small Midcap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Explorer and Small Midcap.
Diversification Opportunities for Vanguard Explorer and Small Midcap
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vanguard and Small is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Explorer Value and Small Midcap Dividend Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Midcap Dividend and Vanguard Explorer 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 Explorer Value are associated (or correlated) with Small Midcap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Midcap Dividend has no effect on the direction of Vanguard Explorer i.e., Vanguard Explorer and Small Midcap go up and down completely randomly.
Pair Corralation between Vanguard Explorer and Small Midcap
Assuming the 90 days horizon Vanguard Explorer Value is expected to generate 1.27 times more return on investment than Small Midcap. However, Vanguard Explorer is 1.27 times more volatile than Small Midcap Dividend Income. It trades about 0.23 of its potential returns per unit of risk. Small Midcap Dividend Income is currently generating about 0.29 per unit of risk. If you would invest 4,901 in Vanguard Explorer Value on August 27, 2024 and sell it today you would earn a total of 372.00 from holding Vanguard Explorer Value or generate 7.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Explorer Value vs. Small Midcap Dividend Income
Performance |
| Timeline |
| Vanguard Explorer Value |
| Small Midcap Dividend |
Vanguard Explorer and Small Midcap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Explorer and Small Midcap
The main advantage of trading using opposite Vanguard Explorer and Small Midcap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Explorer position performs unexpectedly, Small Midcap 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 Small Midcap will offset losses from the drop in Small Midcap's long position.| 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 |
| Small Midcap vs. Bbh Intermediate Municipal | Small Midcap vs. California Bond Fund | Small Midcap vs. Nuveen Minnesota Municipal | Small Midcap vs. Alliancebernstein National Municipal |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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