Correlation Between Vanguard Explorer and Vanguard Capital
Can any of the company-specific risk be diversified away by investing in both Vanguard Explorer and Vanguard Capital 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 Vanguard Capital 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 Vanguard Capital Opportunity, you can compare the effects of market volatilities on Vanguard Explorer and Vanguard Capital 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 Vanguard Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Explorer and Vanguard Capital.
Diversification Opportunities for Vanguard Explorer and Vanguard Capital
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Vanguard and Vanguard is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Explorer Value and Vanguard Capital Opportunity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Capital Opp 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 Vanguard Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Capital Opp has no effect on the direction of Vanguard Explorer i.e., Vanguard Explorer and Vanguard Capital go up and down completely randomly.
Pair Corralation between Vanguard Explorer and Vanguard Capital
Assuming the 90 days horizon Vanguard Explorer Value is expected to generate 1.2 times more return on investment than Vanguard Capital. However, Vanguard Explorer is 1.2 times more volatile than Vanguard Capital Opportunity. It trades about 0.06 of its potential returns per unit of risk. Vanguard Capital Opportunity is currently generating about 0.06 per unit of risk. If you would invest 3,909 in Vanguard Explorer Value on August 27, 2024 and sell it today you would earn a total of 1,364 from holding Vanguard Explorer Value or generate 34.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Explorer Value vs. Vanguard Capital Opportunity
Performance |
| Timeline |
| Vanguard Explorer Value |
| Vanguard Capital Opp |
Vanguard Explorer and Vanguard Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Explorer and Vanguard Capital
The main advantage of trading using opposite Vanguard Explorer and Vanguard Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Explorer position performs unexpectedly, Vanguard Capital 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 Capital will offset losses from the drop in Vanguard Capital'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 |
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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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