Correlation Between Vanguard Explorer and Third Avenue

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Can any of the company-specific risk be diversified away by investing in both Vanguard Explorer and Third Avenue 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 Third Avenue into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Explorer Fund and Third Avenue Real, you can compare the effects of market volatilities on Vanguard Explorer and Third Avenue 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 Third Avenue. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Explorer and Third Avenue.

Diversification Opportunities for Vanguard Explorer and Third Avenue

0.95
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Vanguard and Third is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Explorer Fund and Third Avenue Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Third Avenue Real 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 Fund are associated (or correlated) with Third Avenue. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Third Avenue Real has no effect on the direction of Vanguard Explorer i.e., Vanguard Explorer and Third Avenue go up and down completely randomly.

Pair Corralation between Vanguard Explorer and Third Avenue

Assuming the 90 days horizon Vanguard Explorer is expected to generate 1.16 times less return on investment than Third Avenue. In addition to that, Vanguard Explorer is 1.02 times more volatile than Third Avenue Real. It trades about 0.07 of its total potential returns per unit of risk. Third Avenue Real is currently generating about 0.08 per unit of volatility. If you would invest  1,746  in Third Avenue Real on September 12, 2024 and sell it today you would earn a total of  835.00  from holding Third Avenue Real or generate 47.82% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Vanguard Explorer Fund  vs.  Third Avenue Real

 Performance 
       Timeline  
Vanguard Explorer 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Explorer Fund are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Vanguard Explorer may actually be approaching a critical reversion point that can send shares even higher in January 2025.
Third Avenue Real 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Third Avenue Real are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Third Avenue may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Vanguard Explorer and Third Avenue Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Vanguard Explorer and Third Avenue

The main advantage of trading using opposite Vanguard Explorer and Third Avenue positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Explorer position performs unexpectedly, Third Avenue 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 Third Avenue will offset losses from the drop in Third Avenue's long position.
The idea behind Vanguard Explorer Fund and Third Avenue Real pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.

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