Correlation Between Vanguard Explorer and Banking Fund
Can any of the company-specific risk be diversified away by investing in both Vanguard Explorer and Banking Fund 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 Banking Fund 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 Banking Fund Class, you can compare the effects of market volatilities on Vanguard Explorer and Banking Fund 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 Banking Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Explorer and Banking Fund.
Diversification Opportunities for Vanguard Explorer and Banking Fund
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vanguard and Banking is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Explorer Value and Banking Fund Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banking Fund Class 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 Banking Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banking Fund Class has no effect on the direction of Vanguard Explorer i.e., Vanguard Explorer and Banking Fund go up and down completely randomly.
Pair Corralation between Vanguard Explorer and Banking Fund
Assuming the 90 days horizon Vanguard Explorer is expected to generate 1.36 times less return on investment than Banking Fund. But when comparing it to its historical volatility, Vanguard Explorer Value is 1.6 times less risky than Banking Fund. It trades about 0.23 of its potential returns per unit of risk. Banking Fund Class is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 9,098 in Banking Fund Class on August 27, 2024 and sell it today you would earn a total of 926.00 from holding Banking Fund Class or generate 10.18% 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. Banking Fund Class
Performance |
| Timeline |
| Vanguard Explorer Value |
| Banking Fund Class |
Vanguard Explorer and Banking Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Explorer and Banking Fund
The main advantage of trading using opposite Vanguard Explorer and Banking Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Explorer position performs unexpectedly, Banking Fund 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 Banking Fund will offset losses from the drop in Banking Fund'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 |
| Banking Fund vs. Qs Small Capitalization | Banking Fund vs. Massmutual Select Small | Banking Fund vs. Baird Smallmid Cap | Banking Fund vs. Kinetics Small 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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