Correlation Between Vanguard Explorer and Oberweis Small-cap

Can any of the company-specific risk be diversified away by investing in both Vanguard Explorer and Oberweis Small-cap 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 Oberweis Small-cap 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 Oberweis Small Cap Opportunities, you can compare the effects of market volatilities on Vanguard Explorer and Oberweis Small-cap 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 Oberweis Small-cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Explorer and Oberweis Small-cap.

Diversification Opportunities for Vanguard Explorer and Oberweis Small-cap

0.94

Correlation Coefficient

Vanguard Explorer  Oberweis Small-cap

Almost no diversification

The 3 months correlation between Vanguard and Oberweis is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Explorer Fund and Oberweis Small Cap Opportuniti in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oberweis Small Cap 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 Oberweis Small-cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oberweis Small Cap has no effect on the direction of Vanguard Explorer i.e., Vanguard Explorer and Oberweis Small-cap go up and down completely randomly.

Pair Corralation between Vanguard Explorer and Oberweis Small-cap

Assuming the 90 days horizon Vanguard Explorer Fund is expected to generate 0.79 times more return on investment than Oberweis Small-cap. However, Vanguard Explorer Fund is 1.27 times less risky than Oberweis Small-cap. It trades about -0.11 of its potential returns per unit of risk. Oberweis Small Cap Opportunities is currently generating about -0.12 per unit of risk. 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

Vanguard Explorer Fund  vs.  Oberweis Small Cap Opportuniti

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.

Oberweis Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Oberweis Small Cap Opportunities has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward 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 Vanguard Explorer and Oberweis Small-cap

The main advantage of trading using opposite Vanguard Explorer and Oberweis Small-cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Explorer position performs unexpectedly, Oberweis Small-cap 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 Oberweis Small-cap will offset losses from the drop in Oberweis Small-cap's long position.

The idea behind Vanguard Explorer Fund and Oberweis Small Cap Opportunities 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.