Correlation Between Conestoga Micro and Vanguard Explorer

Can any of the company-specific risk be diversified away by investing in both Conestoga Micro 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 Conestoga Micro and Vanguard Explorer into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Conestoga Micro Cap and Vanguard Explorer Fund, you can compare the effects of market volatilities on Conestoga Micro 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 Conestoga Micro with a short position of Vanguard Explorer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Conestoga Micro and Vanguard Explorer.

Diversification Opportunities for Conestoga Micro and Vanguard Explorer

0.38

Correlation Coefficient

Conestoga Micro  Vanguard Explorer

Weak diversification

The 3 months correlation between Conestoga and Vanguard is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Conestoga Micro Cap and Vanguard Explorer Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Explorer and Conestoga Micro 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 Conestoga Micro Cap 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 has no effect on the direction of Conestoga Micro i.e., Conestoga Micro and Vanguard Explorer go up and down completely randomly.

Pair Corralation between Conestoga Micro and Vanguard Explorer

Assuming the 90 days horizon Conestoga Micro Cap is expected to generate 1.1 times more return on investment than Vanguard Explorer. However, Conestoga Micro is 1.1 times more volatile than Vanguard Explorer Fund. It trades about 0.13 of its potential returns per unit of risk. Vanguard Explorer Fund is currently generating about 0.0 per unit of risk. If you would invest  729.00  in Conestoga Micro Cap on October 24, 2024 and sell it today you would earn a total of  83.00  from holding Conestoga Micro Cap or generate 11.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Conestoga Micro Cap  vs.  Vanguard Explorer Fund

Conestoga Micro Cap

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Conestoga Micro Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly weak primary indicators, Conestoga Micro may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Vanguard Explorer

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Explorer Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Vanguard Explorer is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Conestoga Micro and Vanguard Explorer

The main advantage of trading using opposite Conestoga Micro and Vanguard Explorer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Conestoga Micro 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.

The idea behind Conestoga Micro Cap and Vanguard Explorer Fund 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.