Correlation Between Virtus Kar and Vanguard Explorer

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

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

Diversification Opportunities for Virtus Kar and Vanguard Explorer

0.96

Correlation Coefficient

Virtus Kar  Vanguard Explorer

Almost no diversification

The 3 months correlation between Virtus and Vanguard is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Virtus Kar Small 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 Virtus Kar 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 Virtus Kar Small 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 Virtus Kar i.e., Virtus Kar and Vanguard Explorer go up and down completely randomly.

Pair Corralation between Virtus Kar and Vanguard Explorer

Assuming the 90 days horizon Virtus Kar Small Cap is expected to under-perform the Vanguard Explorer. But the mutual fund apears to be less risky and, when comparing its historical volatility, Virtus Kar Small Cap is 1.05 times less risky than Vanguard Explorer. The mutual fund trades about -0.14 of its potential returns per unit of risk. The Vanguard Explorer Fund is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  11,496  in Vanguard Explorer Fund on December 30, 2024 and sell it today you would lose (987.00) from holding Vanguard Explorer Fund or give up 8.59% of portfolio value over 90 days.

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

Virtus Kar Small Cap  vs.  Vanguard Explorer Fund

Virtus Kar Small

Risk-Adjusted Performance

Very Weak

Over the last 90 days Virtus Kar Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Vanguard Explorer

Risk-Adjusted Performance

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 latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Virtus Kar and Vanguard Explorer

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

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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.